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For much of 2013, Oracle (ORCL) has struggled to get its footing. However, with a $10 billion stock buyback in the works and its next earnings announcement in a few weeks, is now a good time to pick up this software titan on the cheap?
Let’s take a closer look and find out.
Oracle is one of the nation’s largest hardware and software companies. Notably, the company has been around since 1977—so it has kept pace with much of the computer revolution. Over the years, the company has rolled out wave after wave of successful database management systems and has managed to capture the third-highest software sales. Oracle is also known for its enterprise resource planning software, its customer relationship management software as well as its supply chain management software. The company currently employs 120,000 worldwide.
Oracle is due to release its second-quarter operating results after the closing bell on Tuesday, December 17. Right now, analysts expect sales to tick up 0.8% (compared with the same quarter prior year) and earnings to climb 4.7%. Those are pretty modest projections, but it’s still better than the industry average for Application Software companies.
On average, analysts expect Oracle’s competitors to see earnings fall 14.3% compared with last year. However, starting the following quarter, the trend reverts to what it has been for quite some time: For the bulk of 2014, Oracle is expected to underperform the industry average.
As you can tell, Oracle is not the only major software player to have issues. Oracle competes with the likes of computing giants International Business Machines (IBM) and Microsoft (MSFT). If you plug all three of these companies in my Portfolio Grader tool, you can see that Microsoft is the strongest right now in terms of buying pressure and fundamentals. So of the three, MSFT is the only stock I’d recommend at current prices.
Meanwhile, Oracle and IBM are both D-ranked sells due to poor buying pressure, anemic sales growth and slow earnings momentum.
This stock has had a rough time over the past 12 months, oscillating between hold and sell territory. And things have been looking down lately. Currently, the stock is rated a sell due to weakening buying pressure (as shown by its F-rated Quantitative Grade).
Meanwhile, Oracle’s sales growth and earnings momentum have both been downgraded to C-ratings. However, the company still ranks highly on cash flow and return on equity, which are both A-rated. Operating margin growth and earnings growth earn B-ratings. So ORCL receives a B for its overall Fundamental Grade.
Bottom Line: As of this posting I consider ORCL a D-rated Sell.
Would you like to check the fundamentals backing up one of your stocks? For more stock grades, please visit my Portfolio Grader website!