) reported better-than-expected fiscal second quarter results last
month that included a positive earnings surprise and a solid
outlook. In response, Zacks Consensus Estimates for fiscal years
2013 and 2014 have been heading higher, boosting this technology
giant to a Zacks #2 Rank (Buy).
Oracle's dividend yield of 0.7% reflects a strong and relatively
stable cash flow, which makes the stock much more attractive for
Oracle Beats in Q2
On December 18, 2012, Oracle reported fiscal second quarter
earnings of 60 cents per share, which exceeded the Zacks Consensus
Estimate by 3.5%.
Total revenue increased 3.4% year over year to $9.11 billion,
primarily driven by strong new software license sales that fully
offset a continued weak performance from the hardware product
Operating margin expanded 190 basis points ("bps") from the
comparable prior-year quarter, primarily attributable to stringent
cost control. Total operating expenses remained flat year over year
at $5.03 billion.
Oracle's liquidity position continued to improve in the quarter.
Operating cash flow was $13.53 billion and free cash flow was
$12.82 billion at the end of the reported quarter.
On December 21, 2012, Oracle paid an accelerated cash dividend of
18 cents for the second, third & fourth quarters of fiscal
Oracle provided a positive outlook for the third quarter of fiscal
2013. The company expects non-GAAP earnings between 64 cents and 68
cents per share, which is higher than the year-ago level of 62
cents. Total revenue on a non-GAAP basis is expected to grow 1.0%
Over the last 30 days, the Zacks Consensus Estimate for fiscal 2013
climbed 1.6% to $2.57 per share, as 12 of 19 estimates moved
The Zacks Consensus Estimate for fiscal 2014 advanced 3.2% over the
same period to $2.80, as 11 of 18 estimates received a boost.
In addition to the strong earnings growth, Oracle's dividend yield
of 0.7% is quite steady. It started paying a regular cash dividend
from the fourth quarter of fiscal 2009. Oracle raised the dividend
payout by 20% (20 to 24 cents) in the fourth quarter of fiscal
Oracle shares are currently trading at 13.5X forward earnings, a
discount to the industry average of 16.2X. Additionally, its
price-to-book multiple of 3.8 is lower than the industry average of
4.3. Moreover, its PEG ratio is 1, based on a 5-year earnings
growth rate of 13.4%. This indicates that the stock is undervalued.
Redwood City, California-based Oracle Corp. was founded in 1977 and
incorporated later in 2005. Oracle is one of the largest database
and enterprise Software providers. With the acquisition of Sun
Microsystems in January 2010, Oracle began selling hardware
products and services, primarily comprising computer server and
storage products. Oracle has a market capital of $165.34 billion.
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