Why Oracle Earnings Could Make or Break Tech Stocks

Earnings season may be winding down to a crawl, but Oracle Corp. (NYSE: ORCL) is set to report earnings after the close of trading on Tuesday. With many enterprise technology stocks having such a rough time showing any great earnings or revenue growth, Oracle’s earnings report could be crucial to the struggling enterprise tech and IT sector.

Oracle shares are trying to rise further above a prior trading range that had been in place since 2011. With all the concerns about China and other nations not buying enterprise technology and software from U.S. companies, Oracle could set the tone for many other technology companies reporting earnings a month from now.

Thomson Reuters has estimates for the enterprise software leader of $0.70 in earnings per share and $9.36 billion in revenue. For the next quarter, the forecast calls for $0.96 in earnings per share and $11.5 billion in sales.

It has now been a while since Oracle made any major acquisitions, and its 2014 revenue growth is expected to be only 3.5%, followed by almost 5% growth in 2015. Our big question is if Larry Ellison will telegraph whether any large deals are coming down the pipe.

Other key items to consider are as follows:

  • Oracle trades at only 12 times next year’s earnings per share estimates, based on 9.5% earnings growth.
  • Oracle’s 50-day moving average is $37.93, and the 200-day moving average is all the way down at $34.38.
  • Options traders appear to be braced for a move of up to 6%, based on the news reaction.

Oracle’s dividend yield remains low at about 1.3%, and its payout rate is only about 16% to 17% of adjusted earnings. Could a dividend hike becoming, or will we have to wait another quarter?

While it trades near $38.55, the consensus analyst estimate is almost $39.50 and the 52-week range is $29.86 to $39.85. Also, keep in mind that Oracle’s market cap is $174 billion.