Oracle Is Past The Worst Of Its Cloud Transition

Brian White of Drexel Hamilton commented in a research report that Oracle is expected to fall slightly short of his revenue estimate of $9.15 billion and his earnings per share estimate of $0.61. The analyst added that the expected miss will be attributed to a stronger U.S. dollar.

Expectations

"Given the strength of the U.S. dollar since Oracle's earnings call on September 15, we expect a headwind around the company's reported financial results," the analyst wrote. "That said, Oracle provided guidance in constant currency and this is how we plan to evaluate the company's performance. In the future, we believe Oracle should benefit from more favorable repatriation policies and we would like to see a dividend yield of 3.0–4.0 percent (vs. 1.5 percent)."

White continued that he believes Oracle has now passed the "worst of this cloud transition," and the second-quarter results could mark the start of strong cloud trends. In fact, the company is vying to become the first cloud company to hit $10 billion in SaaS/PaaS revenue and the closing of the acquisition of Netsuite will support this goal.

Looking forward to the fiscal third quarter, White is modeling the company to report sales of $9.24 billion and earn $0.64 per share. The closing of the NetSuite acquisition does provide Oracle with some "buffer" space and Oracle itself expects the acquisition to be accretive to its non-GAAP earnings per share in the first full fiscal year after the transaction finalizes.

At last check, Oracle shares were relatively flat on the day at $40.49, just 3 cents off Monday's open.