Oracle's Earnings: What Wall Street's Thinking

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Oracle's (ORCL) fiscal first-quarter was mixed, as the company posted better-than-expected earnings, but missed top line forecasts.

The Redwood City, Calif.-based software giant reported earnings of 59 cents per share on $8.37 billion in sales. Analysts were looking for 56 cents per share in earnings, on $8.5 billion in revenue. The company said that new software license and cloud software subscriptions revenue rose 5% to $1.65 billion, but hardware revenue continued to lag, falling 14% year-over-year to $669 million.

On Oracle's earnings call, the company said it expects second-quarter revenue to fall within a range of 1% year-over-year to up 2%, well below the expected forecast of a 3.5% increase. As such, Oracle expects to earn between 65 cents and 70 cents on a non-GAAP basis. Wall Street is forecasting 69 cents per share.

Despite the weak guidance, Wall Street analysts were largely positive, noting the strong cash flows, and software licensing revenue. Here's what a few of them had to say.

JPMorgan analyst John DiFucci (Overweight)

"ORCL reported F1Q results that were largely in line with expectations, though guidance was slightly below F2Q estimates. Software license was a bit better than expected, growing a modest 1% organic, cc, while Hardware products were below expectations, declining 19% on an organic, cc basis. Cash flow was very strong, as was deferred revenue, reflecting strong software maintenance and hardware support."

Bank of America Merrill Lynch analyst Kash Rangan (Buy, $38 PT)

"We reiterate our Buy rating with a Price Objective of $38. We are revising our 2014/15E EPS from $2.97/$3.22 to $2.94/$3.26. The stock is indicated down 3% in the after-market following a decent quarter. However, tempered 2Q guidance, off of very difficult comps, was lower than anticipated by investors. We believe this is an opportunity. 1Q was a shining light in several respects: Americas new software licenses grew 15% y/y, APAC grew 5% y/y, total database business grew double digits, Exa systems seem to be performing well, and operating margin beat expectations by 100bps. 2Q guidance came in below expectations, but looking past 2Q, 2H FY14E brings in easy comps. Sales attrition was down compared to historical trends and significantly down from last year."

JMP Securities analyst Patrick Walravens (Market Perform)

"We maintain our Market Perform rating on Oracle after the company reported F1Q non-GAAP EPS of $0.59 versus consensus of $0.56 on license revenue growth of 5% versus consensus of 3%. Guidance disappointed at $0.64-$0.69 versus consensus of $0.69 on license growth of negative 6% to positive 4%, versus consensus of positive 2% – leading the stock to trade down 3% in the aftermarket. Oracle executed well this quarter after missing in Q3 and Q4, but the call reflected a certain lack of direction, in our opinion, highlighted by CEO Larry Ellison’s decision to skip the call to attend Races 11 and 12 of the America’s Cup. While we admire Ellison’s passion as Team USA defends the cup, we are hopeful that his energy refocuses on Oracle as the races wrap up and as Oracle’s captain kicks off the OpenWorld conference on Sunday night. We look for FY14 non-GAAP EPS of $2.90 (consensus of $2.89) and for FY15 non-GAAP EPS of $3.17 (consensus of $3.17). Oracle trades at a 2014 P/E of 11x, in line with its peer group."



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: News Headlines , Earnings , Stocks , Technology

Referenced Stocks: ORCL

Chris Ciaccia

Chris Ciaccia

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