What a difference six months can make. In that time, Oracle (ORCL) has gone from an outright “sell” to a solid “buy.” With the software giant’s next earnings report just around the corner, is there further upside ahead?
Company Profile
Oracle is one of the nation’s largest application software companies. Oracle has been around since 1977 — and over the decades it has kept pace with much of the computer revolution. Over the years, Oracle 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. Oracle currently employs 122,000 worldwide, and it brought in over $38 billion in revenue last year.
Future Outlook
Oracle fiscal first-quarter earnings report is scheduled for Sept. 18, after market close. Right now, the consensus estimate calls for $0.64 EPS on $8.77 billion in revenue, which translates to 8.5% year-on-year earnings growth and 4.7% sales growth. By comparison, the rest of the industry is expected to post a 12.5% year-on-year drop in earnings for the quarter.
For fiscal year 2014, Oracle is headed towards 10.1% earnings growth (also topping the 6.9% industry average) and 4.8% sales growth. These are solid projections, but I expect there will be a series of upward revisions now that Oracle has acquired MICROS for $5.3 billion. MICROS manufactures and sells hardware and software solutions to businesses in the restaurant and hospitality industries. The MICROS deal is Oracle’s largest in five years, and management expects the deal to be accretive to sales and earnings.
Current Ratings
ORCL stock has improved significantly in the past six months, advancing from a “D-rated sell” to a “B-rated buy.” Much of this stems from improving institutional buying pressure for ORCL stock, as shown by ORCL’s “B-rated Quantitative Grade.”
Meanwhile, Oracle has a “C” grade for fundamentals. Of the eight fundamental metrics I grade on, Oracle failed sales growth and earnings surprises and barely squeaked by with “Cs” on operating margin growth, earnings growth, earnings momentum and analyst earnings revisions.
On the bright side, Oracle earned “As” for cash flow and return and equity. As of this posting, I consider ORCL stock a “B-rated buy.”
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
