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Earnings Preview: Oracle's Overall Fundamentals Remain Healthy

Earnings Preview: Oracle's Overall Fundamentals Remain Healthy

Oracle Corporation (NYSE: ORCL) is scheduled to report its fiscal year 2017 second-quarter results on December 15 after market close.

D.A. Davidson’s Jack Andrews maintains a Buy rating on the company, with a price target of $52.

Fundamentals Remain Healthy

Andrews believes Oracle’s overall fundamentals continue to be healthy, while anecdotal discussions with systems integrators suggest cloud momentum is also very strong.

“Further, industry sources lead us to conclude that ORCL is competing less aggressively on price and more on product capabilities, aided by an increasing number of referenceable customers,” the analyst mentioned.

Andrews believes release No. 2 of the company’s 12c database could provide a meaningful, multi-year tailwind for Oracle, while alleviating concerns regarding database weakness due to the availability of lower cost alternatives.

“Because the initial release is only available in cloud form, we expect R2 to provide a catalyst to shift more business to PaaS,” the analyst stated.

Q2 Expectations

Andrews noted that the most significant international currencies for the company had all depreciated against the U.S. dollar during the quarter, with the Japanese yen (JPY), euro (EUR) and British pound (GBP) having the largest declines.

This was likely to lead to the revenue missing the guidance, with the analyst estimating a 3 percent headwind to revenues from FX movements.

On the other hand, with only three weeks of contribution from NetSuite Inc (previously traded (NYSE: N))'s subscription in Q2, Andrews estimates a benefit of about $455 million to the FY 2017 revenue and $800 million to the 2018 revenue.

Due to both these effects, the analyst expects a 0.1 percent year-over-year decline in revenue, which would have led to the revenue missing the consensus and the guidance.

The non-GAAP EPS is expected at $0.60, as compared to the consensus of $0.61 and guidance of $0.59–$0.62.

At last check in Tuesday's pre-market session, shares of Oracle were down 0.77 percent at $40.20.

Latest Ratings for ORCL

Jan 2021Goldman SachsInitiates Coverage OnSell
Jan 2021Credit SuisseMaintainsOutperform
Dec 2020B of A SecuritiesReinstatesNeutral

View More Analyst Ratings for ORCL
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