Apps & Software

Oracle Earnings Preview: It's All About the Cash Flow

The two companies we previewed on Thursday both traded lower after beating consensus estimates on both the top and bottom lines. Both also raised guidance. Go figure.

Next week has little in the way of earnings reports. In fact, we spotted only four that might be of general interest. We’ll cover one today and the other three on Tuesday.

Oracle Corp. (NYSE: ORCL) has a market cap of nearly $250 billion and is the third-largest software infrastructure company in the country, trailing only Microsoft and Adobe. Over the past 12 months, the stock has added about 60% to its share price, including a 40% rise so far in 2021.

Oracle’s free cash flow for the 2021 fiscal year that ended in May was $13.75 billion, and fourth-quarter cash flow came in at $4.13 billion. In the August quarter last year, free cash flow totaled $5.52 billion. The company also repurchased $21.6 billion in stock during fiscal 2021. These are compelling numbers and, when Oracle reports first-quarter 2022 results after markets close Monday, analysts will be paying particular attention to cash flow.

Of the 28 analysts covering the stock, 19 rate the shares at Hold. Of the other nine, five rate the stock a Buy or Strong Buy. At a recent price of $90, the implied gain based on a median price target of $80 is 12.5%. At the high price target of $113, the implied upside is 25.6%.

Oracle is expected to report fiscal first-quarter revenue of $9.77 billion, down 13% sequentially but up about 4.3% year over year. Adjusted earnings per share (EPS) are tabbed at $0.97, down 37% sequentially but up 4.3% year over year. For fiscal 2022, current estimates call for EPS of $4.61, down 1.2%, and revenue of $42.23 billion, or 4.3% higher.

The stock trades at 19.4 times expected 2022 EPS, 17.5 times estimated 2023 earnings and 16.8 times estimated 2024 earnings. The stock’s 52-week trading range is $55.14 to $91.78. Oracle pays an annual dividend of $1.28 (yield of 1.43%).