Welcome to the Stock of the Day.
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? Find out today.
Company Profile
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.
Earnings Rundown
Last night Oracle reported fiscal third-quarter results that missed estimates. According to management, Oracle struggled with the impact of a stronger U.S. dollar and other averse currency tailwinds.
Compared with the year ago quarter the company’s top line rose 4% to $9.31 billion, below the $9.36 billion consensus estimate. Over the same period net income climbed 3% to $2.57 billion, or 56 cents per share. Excluding special items adjusted earnings were 68 cents per share, with missed analyst estimates by two cents.
Future Outlook
The earnings report sparked a series of analyst downgrades for the stock. This doesn’t bode well for the company. Prior to the earnings report, the consensus was that FY 2014 would bring 3.5% sales growth and 9.3% earnings growth for Oracle. This is less than a third of the industry average; the application software industry as a whole is expected to see 33.4% bottom-line growth for this year.
Looking ahead to the next quarter, Oracle is headed towards 5% sales growth and 8.5% earnings growth. But those estimates will likely be lowered after Wall Street processes this new information.
Current Ratings
Oracle 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 operating margin growth, earnings growth, earnings surprises and earnings momentum have been downgraded to C-ratings. The company’s sales growth outright fails with a D-rating.
However, the company still ranks highly on cash flow and return on equity, which are both A-rated, and analyst earnings revisions, which is B-rated. So ORCL receives a B for its overall Fundamental Grade.
Bottom Line: As of this posting I consider ORCL a D-rated Sell.
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