By Brendan Gilmartin, VP Research and Content
Oracle (ORCL) is scheduled to report Q4 2013 earnings on Thursday, June 20. The software giant is expected to report its earnings right at the closing bell and host a conference call at 5:00 p.m. ET. Look for a possible reaction in the index futures and broad market ETFs when results are disclosed.
Outliers and Strategy
Back in March, Oracle stated in its Q3 2013 earnings conference call that non-GAAP EPS for the current Q4 period is forecast to range between $0.85 and $0.91, up from $0.82 last year. The current Street estimate is at the midpoint of the range at $0.87 (source: Yahoo Finance). Oracle indicated it expects Q4 2013 total revenue growth on a GAAP and non-GAAP basis to range from negative 1% to positive 4% in constant currency. That would equate to $10.84 billion to $11.39 billion. The consensus is toward high end of that range at $11.13 billion.
Note that Oracle tends to report guidance on the ensuing conference call at 5:00 p.m., an hour after the earnings release. In the past several quarters, earnings were announced immediately after 4:00 p.m. With Oracle drifting below the 52-week high established last March, shares are trading at just 11.7x forward earnings, well below historical averages. A forward PEG ratio of just 1.18 suggests the shares are trading in line with the estimated earnings growth rate. Last quarter, a slight miss on non-GAAP EPS sent shares lower by nearly 10%. The average one-day price move off of earnings is 5%.
- June 17: Oracle could potentially double its dividend from current levels, according to a report from Barron's. The firm also reiterated an Outperform rating on the shares with a $37 price target ahead of earnings, and guided for EPS of $0.88 on revenue of $11.1 billion thanks to solid free cash flow. (The current dividend yield is 0.70%.)
- June 17: Despite a lackluster IT spending backdrop and increased competition, Jefferies maintained a Hold rating and a $36 price target on Oracle, according to a report on StreetInsider.com. The firm cited a strong year-end track record and tempered expectations as potentially positive catalysts.
- June 12: According to a post on StreetInsider.com, Goldman Sachs expects Oracle to deliver solid earnings for the Q4 period, despite a difficult IT environment. The firm cited earnings consistency and improving execution as positive catalysts.
Oracle shares are off roughly 6% from the 52-week high established March 15, but up about 10% from the low established later that month. Following the recent uptick, however, Oracle has encountered stiff resistance in the $34.00-$35.00 area. Should earnings surprise to the upside, Oracle needs to break through that initial zone before making a run back toward the aforementioned high of $36.43. Conversely, there is initial support near the 20-day SMA at $34.00, with further downside risk to the 50-day near $33.50, followed by the 200-day SMA at $33.00.
Oracle shares are holding just above the key moving averages ahead of the Q4 earnings release, thanks in part to an improving macroeconomic backdrop. But with last quarter's surprisingly weak results fresh on the minds of investors and a cautious IT spending backdrop, Street sentiment is mixed ahead of the Q4 numbers. Nonetheless, Oracle also boasts a broad product mix and diverse customer base that serve to insulate the company from the broader market fears, while enterprise growth, valuation, and a seasonally strong fourth quarter have lifted the stock off the lows established earlier this year.
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