Oracle (ORCL) has become a Zacks #5 Rank Strong Sell for the first time in several years. But since March it's been a #4 Rank Sell quite a bit.
The story is one of analysts gradually ratcheting down earnings estimates this year. But recently, the magnitude of downward estimate revisions really picked up to knock ORCL into the cellar of earnings momentum.
In the last two months, the majority of covering analysts have chimed in and taken down this fiscal year's EPS consensus to $2.88 from $3.02, a 4.6% cut. And the next fiscal year was hit by 4.9% when the consensus fell to $3.12 from $3.28.
We don't need to know the intricacies of Oracle's enterprise software business to make use of this data. That's what the analysts are for. And we aren't interested in their "buy, sell, or hold" recommendations either.
The Zacks Rank takes their Earnings Estimate Revisions (EER) and plugs them into a precise formula that compares every company's EPS growth to over 4,000 other stocks. And the resulting relative ranking can make all the difference.
A #5 Rank says "stay away right now." So, when do you come back to ORCL? When it's been released from the cellar. And the Rank will tell you when.
The Tech Wreck is Back
There will be much talk this week about the sales and earnings warnings coming from the semiconductor industry. This will have obvious knock-on effects throughout the Technology sector and other sectors which are sensitive to cyclical worries about slower growth.
So there will probably be many more Technology names competing with ORCL this week to get in the cellar. But even if that moves ORCL back up to #4 Rank Sell or a #3 Rank Hold, don't let that fool you. Check the Detailed Estimates page and see if anything has really changed.
Oracle will be a buy again when those earnings estimates have taken a real turn for the higher.
Kevin Cook is a Senior Stock Strategist for Zacks where he runs the Follow The Money portfolio.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.