Oracle Corp. (NYSE: ORCL) is scheduled to release its fiscal third-quarter financial results after the markets close on Thursday. The consensus estimates call for $0.84 in earnings per share (EPS) and $9.59 billion in revenue, while the same period of last year reportedly had $0.83 in EPS and $9.78 billion in revenue.
That saying of “sometimes you can have too much of a good thing” may be the case with Oracle and its massive share buybacks. A filing with the U.S. Securities and Exchange Commission (SEC) indicates that Oracle’s board of directors, on February 12, authorized the repurchase of up to an additional $12 billion of common stock.
This most recent buyback authorization was under an existing share repurchase program that has no expiration date. Oracle left the door wide open as well to purchase as much or as little as it sees fit, noting this:
[T]he pace of repurchase activity will depend on factors such as Oracle’s working capital needs, cash requirements for acquisitions and dividend payments, debt repayment obligations or repurchases of Oracle’s debt, Oracle’s stock price, and economic and market conditions. … The stock repurchase program may be accelerated, suspended, delayed or discontinued at any time.
It is important to consider how and why Oracle may be guilty of buying back too much stock. In September of 2018, Standard & Poor’s revised its outlook on Oracle to Negative from Stable and specifically referenced its aggressive share repurchases since the passage of U.S. tax reform.
Overall, Oracle has outperformed the broad markets, with its stock up about 17.5% year to date. In the past 52 weeks, the stock is actually flat.
A few analysts weighed in on Oracle ahead of the results:
- JPMorgan has a Neutral rating with a $53 price target.
- Credit Suisse has a Buy rating and a $60 price target.
- Nomura has a Reduce rating with a $42 target.
- Standpoint has a Hold rating.
- Goldman Sachs has a Buy rating with a $55 target price.
- Morgan Stanley rates it at Equal Weight with a $53 price target.
- Atlantic Securities has an Underweight rating and a $45 target.
Shares of Oracle were last seen at $53.02, with a 52-week range of $42.40 to $53.47. The stock has a consensus analyst price target of $52.07.