By Brendan Gilmartin
Oracle (ORCL) is scheduled to report 2Q 2014 earnings after the close of trading on Wednesday, December 18. The software giant is expected to report its earnings right at the closing bell and host a conference call at 5:00 p.m. EST. Look for a possible reaction in the index futures and broad market ETFs when results are disclosed.
Outliers & Strategy
- Non-GAAP Earnings Per Share (EPS): Back in September, Oracle stated in its 1Q 2014 earnings conference call that Non-GAAP EPS for the current 2Q period is forecast to range between $0.65 to $0.70, bracketing the Street estimate of $0.67 (Source: Yahoo! Finance). Last year, Oracle earned $0.64 per share.
- Revenues: Oracle indicated it expects 2Q 2014 total revenue growth on a GAAP and Non-GAAP basis to range from 1% to 4% in constant currency. That would equate to $9.191 billion to $9.464 billion. The consensus is toward low end of that range at $9.19 billion.
Note that Oracle tends to report guidance on the ensuing conference call at 5:00 p.m. EST, an hour after the earnings release. Analysts are expecting 3Q 2014 Non-GAAP EPS of $0.70.
Oracle shares have fallen close to 6% in the several sessions leading up to the release of the 2Q results amid concerns that the earnings and outlook for next quarter may not meet forecasts.
The options market is currently pricing in a 4.85% move off earnings. Not that the shares fell sharply in the 4Q 2013 (6/20/13) and 3Q 3013 (9/18/13) reporting periods after Non-GAAP EPS narrowly missed consensus estimates.
- 12/12: Oracle shares came under heavy selling pressure in response to a pair of analyst downgrades, according to a post on Barron's Online. Morgan Stanley cut its rating from Equal Weight from Overweight, citing lack of catalysts, while Salesforce.com (CRM) and Workday (WDAY) cut into Oracle's share in the cloud market. RBC Capital Markets lowered the shares Sector Perform from Outperform.
- 12/12: According to a report on Benzinga.com, Morgan Stanley cut Oracle from Overweight to Equal-Weight based on lack of catalysts to drive the shares above the levels at the time of the downgrade.
- 12/05: BMO Capital Markets initiated coverage on Oracle with an Outperform rating and $42 target, based on future growth prospects and increased market share, according to a post on Benzinga.com.
Oracle shares have come under heavy selling pressure in the past couple weeks before testing and holding technical support just above the 20-Day SMA near $33.00. With the shares now sitting on solid support and the Relative Strength Index (RSI) just above the 30-level (<30 indicates an Oversold scenario), the market may have already priced in a weak quarter. Should Oracle surprise to the upside, look for initial resistance near $34.50. (Chart courtesy of StockCharts.com)
Oracle shares have come under heavy selling pressure in recent weeks amid concerns over softening product demand, increased competition in the cloud-computing space, and lack of near-term growth catalysts. But with the shares off nearly 6% since touching a high of $35.60 on December 12/9, much of the weakness may be priced in at these levels, while the shares are hovering above strong technical support in the $33 area. Furthermore, Oracle is now trading at just 14.5x trailing earnings with a FWD PEG ratio of just 1.34 and remains the market leader in database and middleware solutions, limiting potential downside at these levels.
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