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Oracle Earnings Preview: The Breakout Holds, But Can They Fix The Cloud Issues?

Mar. 10, 2018 6:22 AM ETOracle Corporation (ORCL)20 Comments
Brian Gilmartin, CFA profile picture
Brian Gilmartin, CFA


  • Oracle - one of the 1990s "Original Gangsters" - broke out above its previous $45, April 2000 all-time-high in June '17, but has struggled since that time.
  • The Cloud is a growth area for Oracle, but Oracle revenue growth has been inconsistent.
  • Oracle has put up 4 quarters of mid-single-digit revenue growth after 5 years of mediocrity, somewhat aided by the weaker dollar.
  • Total Cloud segment revenue is 16% of Oracle's total revenue - we'd like to see that trend into the 20% range.

Oracle (NYSE:ORCL), the database giant that has struggled mightily to get its Cloud segments up and running smoothly, reports its fiscal Q3 '18 financial results after the market close on Monday, March 19th, 2018.

The stock broke out to an all-time high after the release of the May '17, fiscal Q4 '17 financial results in mid-June of 2017, when actual revenue and EPS beat estimates handily, but the last two quarters have been just okay, and the stock has remained stuck in a trading range between the $46 area on the low and $53 in the upper end of the range.

I do think it will take renewed strength in the Cloud metrics to bust the stock out of the high end of the trading range.

Oracle's business lines and transition from a 1980s and 1990s database giant to the Cloud segment have been written about many times over the last few years (here, here and here).

As readers can see, the theme of my Oracle earnings previews the last few years has been pretty consistent and once again we're faced with some worries over the consistency of growth within Oracle's Cloud segments.

To be clear, the Cloud segment is growing for Oracle, but it moves in fits-and-starts as the last two quarters have shown. I think shareholders would like to see some consistent growth in Cloud revenue as well as some stability in the operating margin.

Here is the trend in Oracle's Revenue and EPS estimates:

Q3 '18 (est) Q2 '18 Q1 '18 Q4 '17
2020 EPS est $3.47 $3.43 $3.36 $3.36
2019 EPS est $3.18 $3.17 $3.17 $3.18
2018 EPS est $2.94 $2.94 $2.93 $2.93
2020 est EPS gro rt 9% 8% 6% 6%
2019 est EPS gro rt 8% 8% 8% 9%

This article was written by

Brian Gilmartin, CFA profile picture
Brian Gilmartin, is a portfolio manager at Trinity Asset Management, a firm he founded in May, 1995, catering to individual investors and institutions that werent getting the attention and service deserved, from larger firms. Brian started in the business as a fixed-income / credit analyst, with a Chicago broker-dealer, and then worked at Stein Roe & Farnham in Chicago, from 1992 - 1995, before striking out on his own and managing equity and balanced accounts for clients. Brian has a BSBA (Finance) from Xavier University, Cincinnati, Ohio, (1982) and an MBA (Finance) from Loyola University, Chicago, January, 1985. The CFA was awarded in 1994. Brian has been fortunate enough to write for the TheStreet.com from 2000 to 2012, and then the WallStreet AllStars from August 2011, to Spring, 2012. Brian also wrote for Minyanville.com, and has been quoted in numerous publications including the Wall Street Journal.

Analyst’s Disclosure: I am/we are long ORCL, AMZN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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