Earnings Preview: Oracle

Mar.25.10 | About: Oracle Corporation (ORCL)

Oracle (NASDAQ:ORCL) is expected to report Q3 earnings after the market close on Thursday, March 25, with a conference call scheduled for 5:00 pm ET.

Guidance

The consensus estimate is 38c for EPS and $6.35B for revenue, according to First Call. During its Q2 conference call held on Dec. 17, the company provided better-than-expected Q3 guidance. For Q3, Oracle expects non-GAAP EPS of 36c–38c, an increase of 5.9% from the 34c reported in Q3 of 2009. Management expects total revenue to rise 3%-6% in Q3 at the current exchange rates. The guidance assumes a non-GAAP tax rate of 28% versus 26.6% last year. The guidance does not include the impact of the Sun Microsystems acquisition. Oracle has met or exceeded Consensus expectations in the last two years. Oracle’s recent results and guidance demonstrate that enterprise and technology spending is on the mend. Investors will be anxious to hear if that trend is continuing.

Analyst Views

FBR Capital expects Oracle to report good Q3 results, with some modest revenue and EPS upside possible. FBR expects Oracle's license revenues to be at least in line with the Street's $1.59B expectation, which represents an increase of 5% year-over-year. Their checks show that Oracle had a good close to its quarter, with its database 11g R2, middleware, Exadata, business intelligence, and vertical applications products doing well. FBR's $1.15B DBMW license estimate represents growth of 3% YOY. Their $404M application license estimate represents growth of 2% YOY. While FBR thinks Oracle executed well, revenue upside may be muted by the appreciation of the dollar. FBR believes there is good possibility for EPS upside due to tight cost controls and continued buybacks. Overall, FBR thinks Oracle can deliver better-than-expected revenue and cost synergies from Sun. The firm maintains an Outperform rating and $30 target. FBR does not expect the Street’s estimates to change materially.

For Q4, the Street is expecting revenues and pro forma EPS of $9.56B and 53c, respectively. For FY11, the Street is expecting revenues and pro forma EPS of $35.1B and $1.88, respectively.