We expect application software provider
) to beat expectations when it reports fiscal third quarter 2014
results on Mar 18. Last quarter, it posted a 3.13% positive
surprise. The company has posted an average positive earnings
surprise of 2.41% over the past four quarters. Let's see
how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that Oracle is likely to beat earnings
because it has the right combination of two key ingredients.
Positive Zacks ESP:
Earnings ESP or expected surprise prediction, which represents
the difference between the Most Accurate estimate and the Zacks
Consensus Estimate, is at +1.49%. This is very meaningful and a
leading indicator of a likely positive earnings surprise for
Zacks Rank #3 (Hold):
Note that stocks with Zacks Ranks #1, #2 and #3 have a
significantly higher chance of beating earnings. The Sell-rated
stocks (#4 and #5) should never be considered going into an
The combination of Oracle's Zacks Rank #3 (Hold) and +1.49% ESP
makes us very confident in looking for a positive earnings beat
on Mar 18, 2014.
What is Driving the Better Than Expected
Oracle's encouraging second-quarter results came as relief to
investors as it proved that management's turnaround initiatives
Although government IT spending is expected to remain muted,
improving macroeconomic environment in the Americas and Europe,
the Middle East and Africa is expected to boost enterprise
spending in the remainder of fiscal 2014. This will also boost
Oracle's top-line growth, going forward.
Moreover, the acquisition of the industry's leading cloud-based
big data platform, Bluekai will stimulate growth going forward by
providing greater customer satisfaction. It will now be able to
provide customers with the ability to build the richest user
profiles combining information from first party and third party
sources including media, advertising, social, and mobile sources.
Additionally, higher subscription revenues are expected to
provide a recurring high margin revenue base, going forward.
Additionally, improvement in sales force hiring will continue to
boost bookings. However, this may hurt margins in the near term.
Further, stiff competition from the likes of
) remains a major headwind in the near term.
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