A Look at Earnings from Oracle and Bed, Bath & Beyond

by Ed Elfenbein | December 23, 2012 11:00 am

A Look at Earnings from Oracle and Bed, Bath & Beyond

Earnings news was a bit of a market mover over the last week, so I wanted to touch base with you on  reports from Oracle (NASDAQ:ORCL[1]) and Bed, Bath & Beyond (NASDAQ:BBBY[2]).

As I told you last week to expect[3], Oracle easily topped its earnings expectations. For its fiscal Q2, Oracle earned 64 cents per share[4], which was three cents better than Wall Street’s consensus.

This was a solid report for Oracle[5]. New software license and subscription sales rose by 17%. That’s usually a good indicator of future revenue. Hardware is still very weak, but the company has indicated that that’s ready to turn a corner. Here’s a good video of Mark Hurd discussing the earnings report[6].

The market was very pleased with Oracle’s results: the stock broke out to a new 52-week high and is now a 32.32% winner on the year. For fiscal Q3 (which is December, January and February), Oracle said it expects earnings between 64 and 68 cents per share. The Street had been expecting 62 cents per share, so that’s good news.

After the close on Wednesday, Bed Bath & Beyond reported fiscal Q3 earnings of $1.03 per share. The Street had been expecting $1.02 per share. These results were pretty good: sales rose 15.3% to $2.702 billion. The key metric to watch for with retailers is comparable-store sales. For Q3, that rose by 1.7%. The company estimates that Hurricane Sandy knocked 0.9% off comparable-store sales growth. Overall, Q3 was a nice comeback from the poor results for Q2. Bed Bath & Beyond also announced a $2.5 billion share repurchase program. Personally, I’d much rather they had a dividend.

Now let’s look at guidance. For a retailer like BBBY, Q4 is extremely important. For Q4, the company sees earnings ranging between $1.60 and $1.67 per share. Wall Street had been expecting $1.75, so this was a disappointment, and the stock got cracked for 6.5% on Thursday. The shares are now about where they were at November’s low.

The problem is that the company faces some higher operational costs, plus they’ve become overly reliant on coupons in order to get people in the door. That was understandable during the housing bust, but they need to wean themselves off that strategy. I

’d much prefer to see BBBY hit comparable-store sales growth of 4%, and I think they can do that. Despite the soggy guidance, BBBY is still putting up some impressive numbers, and that’s why I’m sticking with them for 2013. This is a very well-run company, and I’m not going to be rattled by short-term jitters.

Endnotes:
  1. ORCL: http://studio-5.financialcontent.com/investplace/quote?Symbol=ORCL
  2. BBBY: http://studio-5.financialcontent.com/investplace/quote?Symbol=BBBY
  3. As I told you last week to expect: http://www.crossingwallstreet.com/archives/2012/12/cws-market-review-december-14-2012.html
  4. 64 cents per share: http://www.cnbc.com/id/100322192/Oracle_Earnings_Top_Expectations_Shares_Jump
  5. This was a solid report for Oracle: http://investorplace.com/2012/12/oracle-bucks-the-it-slowdown/
  6. discussing the earnings report: http://www.crossingwallstreet.com/archives/2012/12/mark-hurd-on-oracles-earnings.html

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