Though earnings season is in the mental rear-view mirror for most investors, as anyone who owns Oracle stock likely knows, the fat lady hasn’t sung yet. Oracle Corporation (NYSE:ORCL) is slated to release its fiscal Q3 2015 results after the closing bell rings on Tuesday.
The stock hasn’t been easy to own since the company’s previous earnings report on December 18. ORCL shares jumped 10% immediately following that good news, and then spent the next three months giving all of that gain back.
Given the stock’s firm rally on Friday, though, the market is saying it expects the Oracle earnings announcement to be an encouraging one.
What exactly are analysts collectively expecting, and what factors do ORCL owners need to keep in mind about the past and the future? Here’s a look at what current or prospective owners of Oracle stock need to know about the company before last quarter’s earnings figures are released.
Oracle Earnings Preview
As of the latest look, analysts expect the company to post a profit of 69 cents per share, versus a bottom line of 68 cents per share of ORCL in the same quarter a year earlier. The pros are also collectively looking for a top line of $9.69 billion, up slightly from the year-ago revenue total of $9.32 billion.
Although the company topped estimates last quarter, an Oracle earnings beat is hardly a foregone conclusion. The company failed to top or even meet estimates in the three quarters prior to fiscal Q2 2015′, and an earnings beat has been a 50/50 proposition since 2011.
On the other hand, while the technology company has been hot and cold in terms of topping estimates, it has been more than a reliable growth name … even if it has needed to make a handful of acquisition of smaller growth companies to keep the sales and earnings figures moving higher.
Oracle has logged 10 straight years of higher annual profits and higher annual income, and little has changed over the past couple of quarters that would slow that momentum now.
Things for ORCL Owners to Think About
Though at the end of the day it’s all about the numbers, it’s the business environment and marketability of Oracle’s products and services that keep the top and bottom lines growing. To that end, there are three big questions ORCL shareholders may want to ask themselves (or ask the company) for Tuesday’s earnings report.
1. Currency headwinds: The sky-high U.S. dollar has caused measurable trouble for many U.S. multinational companies, and Oracle isn’t immune to those hurdles. Broadly speaking, analysts believe disadvantageous exchange rates will impact the Oracle earnings numbers in the lineup for Tuesday, though only minimally. Most also think that adverse impact has already been baked into the price of ORCL … and perhaps then some.
Stifel Nicolaus analyst Brad Reback noted:
“Overall, we expect a fairly in-line print on a constant currency basis, but caution F/X headwinds and pockets of geographic choppiness can weigh on reported results. We slightly temper our estimates given F/X headwinds post-guidance. Much of the call will likely focus on Oracle’s transition to the cloud and we expect another quarter of solid double-digit cloud growth to offset license revenue softness.”
Speaking of cloud…
2. Growing the cloud business: There’s no denying the data-management business is transitioning to a cloud-centric market. What’s not as clear is who’s going to come out on top once the market has fully matured. Oracle is clearly positioned to lead, but competitors aren’t going to simply hand market share over to Oracle. Detailed plans of how Oracle is going to lead the market are now in order. Last week’s announcement that the company’s Social Cloud’s Social Relationship Management Tool new support of Instagram and Weibo is an example of such initiatives.
3. Acquisition spree: Oracle has made several acquisitions in recent years, the most recent of which as a $1.2 billion offer for Datalogix. The deals have worked too, allowing Oracle to expand its footprint while adding different aspects to its “product.” These acquisitions haven’t been cheap though. It may be time, here in the midst of what some have called a technology bubble, for owners of ORCL stock to start asking of it would be better to build rather than buy.
Bottom Line for Oracle Stock
ORCL is surprisingly volatile for a major large cap name, though that volatility have been net-bullish for years, in step with the company’s growth. Even disappointing Oracle earnings reports have proven to be buying opportunities for a beaten-down Oracle stock.
By the way, Oracle is battling Apple in our March Madness stock-showdown. Though it’s a first-round underdog, a solid earnings report from the company could be just what it needs to pull ahead of the much more popular consumer-tech name. You can bring ORCL back from behind (if you feel it’s a better investment than AAPL) by voting for it here.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
