UBS, KeyBanc Preview Oracle's Q4, Eye Forex Impact

Oracle Corporation ORCL is scheduled to report its fourth-quarter results after the market close Wednesday, June 19.

The print marks the easiest comp of the year for the tech company, but could be impacted by a stronger U.S. dollar, according to UBS.

The Analysts

UBS' Jennifer Swanson Lowe maintained a Neutral rating on Oracle with an unchanged $54 price target.

KeyBanc Capital Markets' Brent Bracelin maintained a Sector Weight rating. 

UBS Sees 'Modest At Best' Growth

Oracle previously guided for its constant currency revenue growth to accelerate in fiscal 2019 versus 2018, Swanson Lowe said in a Friday note.

Constant currency growth year-to-date stands at 2% versus 3% in fiscal 2018, and the acceleration seen this year has been "modest at best," the analyst said. 

Recent moves in the U.S. dollar may be greater than what Oracle previously assumed in its guidance, Swanson Lowe said. The case to be skeptical on Oracle's growth prospects can be made until the company proves otherwise, she said. 

Finally, Oracle's remaining $12-billion share buyback authorization coupled with a dividend yield north of 2% offers a "backstop" to the stock, according to UBS. 

KeyBanc On Cloud, FX Headwinds

Heading into Oracle's print, KeyBanc expects the cloud business and foreign exchange headwinds to impact results, Bracelin said in a Thursday note.

The cloud business faces ongoing "secular pressures" as large enterprises speed up spending in modern cloud stacks, the analyst said. This could continue impacting Oracle's revenue growth, which remains stuck in a negative 3% to positive 5% range over the past seven years, he said. 

Foreign exchange impacted Oracle's third-quarter report by 400 basis points, and the U.S. dollar has continued to strengthen since then, Bracelin said. This could not only impact fiscal fourth-quarter results, but future performance into the next fiscal year, he said. 

Oracle's "aggressive" stock buyback program could result in the company's net debt approaching $12 billion, the analyst said.

On the other hand, the company does generate "healthy" free cash flow of $12 to $14 billion annually, giving the company some flexibility in how it funds buybacks or lowers its debt load, according to KeyBanc. 

Price Action

Oracle shares were trading down by 0.46% at $53.59 at the time of publication Friday. 

Related Links:

Analysts Say Oracle's Outlook Is Uncertain Following Earnings Beat

Oracle Can't Keep Up $10B In Buybacks Per Quarter, Nomura Instinet Says In Double Downgrade

Photo courtesy of Oracle.