What to Look for in Oracle Earnings

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Oracle Corp. (NYSE: ORCL) is scheduled to report its fiscal third-quarter financial results after the markets close on Tuesday. The consensus estimates from Thomson Reuters are calling for $0.62 in earnings per share (EPS) on $9.13 billion in revenue. The same period from the previous year had $0.68 in EPS on $9.33 billion in revenue.

Co-Chief Executive Officer Mark Hurd has made almost all of Oracle’s services available via the Internet, as the database-software company changes its business model to fit a new competitive landscape. Revenue generated from software license updates and support constituted 52% of Oracle’s total revenue of $9.0 billion in the fiscal second quarter of 2016, which was more or less in line with estimates.

The analysts also feel that as the company’s 12C database cycle starts to contribute during calendar 2016, the stock could very well be poised for what they term a breakout year. After recent investor meetings, the analysts raised fiscal year 2017 cloud margins to 66% from 63% and earnings per share to $2.80. They also believe that the software giant may be on the verge of a multiyear database product cycle.

The company trades at about 15 times estimated 2016 earnings, and it sports a solid free cash flow yield. Combined sales in Oracle’s cloud software, infrastructure and platform-as-a-service businesses were solid, and Jefferies feels that this business has room to grow.

A few analysts weighed in on Oracle ahead of its earnings report:

  • Credit Suisse reiterated a Buy rating.
  • Macquarie initiated coverage with an Outperform rating and a $45 price target.
  • Drexel Hamilton reiterated a Buy rating with a $46 price target.

So far in 2016, Oracle has outperformed the broad markets, with the stock up 7% year to date. However, over the past 52 weeks the stock is down 5%.

Shares of Oracle were last trading at $38.83, with a consensus analyst price target of $43.50 and a 52-week trading range of $33.13 to $45.24.