Oracle Earnings Preview: Modest Revenue and EPS Growth Expected (ORCL)

, which holds its 2013 OpenWorld conference in San Francisco next week, is scheduled to report its fiscal first-quarter results Wednesday, September 18, after the markets close. Investors will be looking for some good news after two consecutive quarters of lackluster sales, perhaps significant growth in new software licenses or cloud software subscriptions. They also will be looking for ways that recently announced strategic partnerships (see below) may be helping to boost the top line.

Analysts on average predict that Oracle will report revenue for the quarter that rose about 3.3 percent year-over-year to $8.48 billion. Per-share earnings are expected to come to $0.56, which would be up from $0.53 per share in the same quarter of last year. That consensus earnings per share (EPS) estimate has dropped in the past 60 days by two cents. Also, note that Oracle has topped earnings expectations in only one of the past four quarters. Fourth-quarter EPS were in line with the analysts' average forecast. Oracle said its earnings rose in the fourth quarter, but revenue fell short of consensus estimates. The company also announced that it would double its quarterly dividend, and that its listing would move from Nasdaq to the New York Stock Exchange. However, the share price pulled back more than nine percent following the fourth-quarter report. Looking ahead to the current quarter, the analysts' consensus forecast calls for sequential and year-over-year growth in both earnings and revenue. So far, full-year EPS are expected to be more than seven percent higher, relative to the previous year, on a rise of almost five percent in revenues.

Oracle makes, markets, hosts and supports database and middleware software, applications software and hardware systems. It is the third-largest software maker by revenue, after

and

. The company has a market capitalization near $153 billion and a dividend yield of about 1.5 percent. Oracle is based in Redwood City, California, and Larry Ellison has been the chief executive since it was founded in 1977. Competitors include IBM, Microsoft and

, all of which are scheduled to share quarterly results in October. Analysts forecast EPS growth from all three companies, but flat revenues from IBM and double-digit revenue growth from Microsoft, relative to a year ago. During the three months that ended in August, Oracle priced a $3 billion offering and formed strategic partnerships with

, Microsoft,

and

. Also, as mentioned above, it announced the exchange switch and hiked its dividend.

Oracle's long-term EPS growth forecast is more than 11 percent, and the price-to-earnings (P/E) ratio is less than the industry average. It has an operating margin that is greater than the industry average, and its return on equity is about 25 percent. The number of shares sold short as of the most recent settlement date was more than 42 million, which is more than one percent of the Oracle's total float. The days to cover was less than three. Of the 41 analysts surveyed by Thomson/First Call who follow the stock, 10 rate it at Strong Buy and another 15 also recommend buying shares. According to Morgan Stanley analysts, "history suggests Oracle remains a dominant software vendor for the foreseeable future and investors should garner comfort in the durability of EPS growth." The analysts believe the stock has some headroom as their mean price target represents more than seven percent potential upside, relative to the current share price. That target price is less than the 52-week high reached back in March, though. Shares are up more than 10 percent since the slide after the fourth-quarter report. The share price still is down about five percent year-to-date and below the 200-day moving average. Over the past six months, the stock has outperformed IBM and SAP, as well as the broader markets, but underperformed Microsoft.