Can Oracle (ORCL) Keep Earnings Beat Streak Alive in Q1?

Oracle ORCL is slated to release first-quarter fiscal 2020 results on Sep 12.

Notably, the company surpassed the Zacks Consensus Estimate in the trailing four quarters, with an average positive surprise of 4.74%.

In fourth-quarter fiscal 2019, Oracle reported non-GAAP earnings of $1.16 per share, which surpassed the Zacks Consensus Estimate of $1.07 per share. Revenues of $11.139 billion also outpaced the Zacks Consensus Estimate of $10.945 billion.

Guidance & Estimates for Q1

For the first quarter of 2020, total revenues are anticipated to improve 1-3% in cc. In dollar terms, total revenues are expected to grow 0-2%.

The Zacks Consensus Estimate for revenues for fiscal first quarter is pegged at $9.29 billion, indicating an improvement of almost 1% from the year-ago quarter.

Oracle anticipates first-quarter non-GAAP earnings to be 80-82 cents per share while non-GAAP earnings are expected to be 81-83 cents in cc.

We note that the Zacks Consensus Estimate for earnings stayed at 81 cents in the past 30 days and indicates growth of 14.1% from the year-ago reported figure.

Oracle Corporation Price and EPS Surprise

 

Oracle Corporation Price and EPS Surprise

Oracle Corporation price-eps-surprise | Oracle Corporation Quote

Favorable ESP

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided.

Oracle has an Earnings ESP of +0.10% and a Zacks Rank #3, which makes us optimistic on a plausible earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Let’s see how things are shaping up for this announcement.

Factors Likely to Influence Q1 Results

Strength in Autonomous Database: Key Catalyst

Oracle is strategically expanding Autonomous Database portfolio by incorporating robust ML and AI capabilities. Markedly, JASCI, Super 99, among others are utilizing Oracle’s services running on the company’s public cloud platform.

At Oracle’s Analytics Summit, the company recently made a slew of additions to Oracle Analytics Cloud Platform suite of services. Oracle also entered into a partnership with Microsoft MSFT, which is expected to enhance the companies’ presence in the enterprise cloud market.

We expect the improvements to the company’s database services to generate incremental revenues and reflect positively in the upcoming results. Moreover, synergies from Microsoft Azure partnership are likely to act as a tailwind.

Solid Adoption of Cloud Services Remains Noteworthy

Oracle is making every effort to enhance functionalities of cloud-based applications, which is encouraging adoption.

For instance, during the quarter under review, Oracle Data Cloud’s Contextual Intelligence capabilities were selected by Reddit to empower advertisers with brand safety control tools on a real-time basis. Given Reddit platform’s popularity among users, this integration provides Oracle’s Contextual Intelligence considerable exposure to digital advertising and content optimization domains.

We believe adoption of Oracle Data Cloud services, which offer marketers the required data and tools to strengthen their end-to-end marketing processes, bodes well for the company’s top line. Moreover, synergies from other acquisitions comprising Grapeshot, Moat, Crosswise, AddThis, BlueKai, and Datalogix, are strengthening the platform.

Also, momentum in cloud-based Fusion ERP, NetSuite and HCM applications are expected to continue in the to-be-reported quarter.

Other Factors to Consider

Higher sales of cloud-based applications are anticipated to outweigh the decline in the hardware business. This is expected to favor margin expansion in the to-be-reported quarter.

Nonetheless, the Zacks Consensus Estimate for Total Hardware revenues is pegged at $844 million, down from $994 million reported in fourth-quarter fiscal 2019.

Moreover, lawsuit expenses pertaining to U.S. Department of Defense’s (DoD) Joint Enterprise Defense Infrastructure (JEDI) cloud contract does not bode well for Oracle’s business opportunities with DoD. This is likely to weigh on the company’s bottom line and might impact the stock performance.

Other Stocks that Warrant a Look

Here are other stocks which you may consider as our model shows that these too have the right combination of elements to post an earnings beat in its upcoming release:

Micron Technology MU has an Earnings ESP of +7.76% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here. The company is set to report fourth quarter fiscal 2019 earnings on Sep 26.

General Mills GIS has an Earnings ESP of +0.37% and a Zacks Rank #2. The company is slated to report first quarter fiscal 2020 earnings on Sep 18.

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