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Q1 Preview: Oracle (ORCL) Should Meet Expectations Amid Economic Headwind

Oracle Corp. (Nasdaq: ORCL) is lower Tuesday afternoon, heading into its first-quarter earnings report.

After the market closes, Oracle is expected to report revenue of $8.36 billion and earnings of 47 cents per share. Earnings would be a 37 percent dip from last quarter, and 12 percent beat when compared with the same period last year.

Shares of Oracle fell 17.8 percent through the quarter, to $28.07 at the end of August. Oracle is up about 2.2 percent since the end of the quarter, but down 7.9 percent on the year.

Oracle shares are currently going for about 11 times forward earnings, compared with 12 times for IBM ( IBM ), 5 times for Hewlett-Packard ( HPQ ), and 17 times for SAP AG ( SAP ). Where Oracle is currently shinning is in debt-to-equity, with Oracle at 0.4, compared with 1.3 for IBM and 0.7 at H-P. SAP is in-line with 0.4 as well.

Data from Bloomberg shows 35 analysts with a Buy on Oracle, 7 at Hold, and 1 suggesting to Sell. The price target average is $36, wth a low of $30 and high of $42. Oracle has traded in a range of $24.72 to $36.50 over the last 52-weeks, and shares at about $28.50 indicates analysts are expecting more upside than downside.

Analyst Comments

  • Goldman Sachs recently added Oracle to it's Americas Conviction Buy list. Goldman is expecting earnings of 46 cents per share and revenue of $8.28 billion in the quarter. Commenting on the quarter, "license sales and hardware product revenue will be the focus for the quarter. We are modeling reported license revenue of $1.44 bn, representing 12% yoy growth, versus consensus of $1.47 bn (+15% yoy). This compares to management's license growth guidance of +10% to +20% on a reported basis. On the hardware side, we are forecasting product sales (which excludes maintenance revenue) of $1.04 bn (-3% yoy) which compares to consensus at $1.06 bn (-2% yoy) and guidance of down 5% to up 5%."

    Goldman says checks indicate a mild disruption in this quarter, despite concerns of tighter enterprise spending.

  • Collins Stewart sees a mostly in-line quarter, modeling for earnings of 46 cents and revenue of $8.385 billion. Collins sees license revs getting a 5 percent acquisition benefit from Art Technology and Fatwire. On Hardware, Collins thinks it "could be weak in light the macro uncertainty on top of ORCL's struggles there. Also, ORCL's Infiniband provider for Exadata/Exalogic saw a 20% Q/Q decrease in sales to ORCL in its June quarter suggesting the ramp in these products could not trump seasonality."

  • Wells Fargo is modeling for earnings of 47 cents and revenue of $8.4 billion. License revs should be about $1.5 billion, falling with the guided range by Oracle. Despite economic fears, Wells expects that Oracle had good enough sales and landed within the guided range.

    Wells also said, "the likelihood of an HP acquisition in the near term is extremely low. We think there are other potential options that are more strategic, have less complexity, and smaller price tags."

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


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

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