Oracle Corp. (NASDAQ: ORCL) almost certainly will to dominate the earnings reports from technology in the week ahead. The $160 billion enterprise software giant’s streak of beating earnings has not been as robust over the past few reports, but the company is still integrating actual hardware business into what always has been a software player. Larry Ellison and the team will report quarterly earnings on Thursday, June 20, after the close of the stock market. Be advised that this is the fourth quarter and fiscal year-end earnings report, and the weak performance will not automatically set the bar artificially low.
Thomson Reuters has a consensus estimate of $0.87 in earnings per share as of now, but this may change slightly in the days ahead. The revenue estimate is $11.12 billion. Oracle generally offers guidance for the quarter ahead in its conference call, and the consensus estimates for the August quarter are currently $0.58 per share earnings and revenue of $8.58 billion. If the current estimate of $2.68 per share is hit by the company, its shares currently trade at almost 12.7 times earnings. If the $2.92 consensus earnings estimate for fiscal year 2014 holds up, then Oracle is valued today at 11.6 times expected earnings.
Oracle shares are down almost 1% at $33.95 in mid-Friday trading, ahead of next week’s report, and its 52-week trading range is $26.69 to $36.43. Oracle saw its shares sharply punished in March after earnings, dropping from roughly $35.50 to almost $31.00 before shares snapped back. The stock has been unable to remain above $35 since, and the latest support in recent weeks has been right around $33.50.
Unfortunately we are talking about a range-bound stock, and that implies that investors are currently in a “wait and see” pattern ahead of earnings. The Thomson Reuters consensus stock price target from analysts is $37.65 for Oracle.
As far as the earnings report that took so much value out of Oracle, the issue was a 1% drop in revenues, with new software and cloud subscriptions down 2%. There was 7% growth in license updates and support sales. Currency issues were a large part of the issue as well, as Oracle’s report addressed the strength of the U.S. dollar by saying “Total revenues also would have been 1% higher and new software licenses and cloud software subscription revenues would have been 2% higher than reported.”
Expectations will not be just to give Oracle a pass over an artificially low bar this quarter, since its stock fell so much last quarter. When Oracle talked about its internal metrics, its non-GAAP operating margin was at a record 47% for a third quarter report. What stood out was that Oracle said it expects that margin rate to reach an all-time high for the fiscal year, and this coming report will be the year-end report. Oracle set its own bar high here.
Other big technology earnings to watch next week will be from Adobe Systems on Tuesday, and also Micron Tech and Red Hat on Wednesday.