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Is a Surprise in the Cards for Oracle (ORCL) in Q4 Earnings?

Zacks Equity Research

Oracle Corporation ORCL is set to report fiscal fourth-quarter 2017 earnings on Jun 21.

Last quarter, it delivered a positive surprise of 10.53%. The company delivered an average positive earnings surprise of 0.42% in the past four quarters.

Earnings (including stock-based compensation) of 63 cents per share and revenues of $9.27 billion in fiscal third-quarter 2017 comfortably beat the Zacks Consensus Estimate of 57 cents and $9.24 billion, respectively.

We also note that Oracle has outperformed the S&P 500 on a year-to-date basis. While the index gained 10%, the stock returned 18.2% over the same time period.

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

Factors to Consider

Of late, Oracle has been gaining traction driven by its Cloud segment. Hearst was added to its cloud customer base in March. It also added a host of new features to its Prime Projects Cloud Service. The company also provides Retail Merchandising Solutions via Oracle Cloud. Hence, this segment is likely to play an instrumental role in driving the company’s growth.

Moreover, Oracle unveiled its Cloud Converged Storage solution this quarter. The first of its kind storage system can merge cloud services to on-premises Network Attached Storage (NAS) systems.

Notably, the launch of Oracle Utilities Operational Device Cloud Service (ODCS) will also boost the top line.

Management expects total revenue to grow in the range of (1%) to 2% for the fourth-quarter. Earnings are anticipated to be between 78 cents and 82 cents for the quarter. However, impact from adverse currency is a concern.

Oracle Corporation Price and EPS Surprise

Oracle Corporation Price and EPS Surprise | Oracle Corporation Quote

Earnings Whispers

Our proven model does not conclusively show that Oracle is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Oracle currently has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 73 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Oracle has a Zacks Rank #2 that increases the predictive power of ESP. However, the company’s ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

The following stocks can be considered at the moment, as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases:

Keysight Technologies Inc. KEYS has an Earnings ESP of +1.89% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Microchip Technology Incorporated MCHP has an Earnings ESP of +3.51% and a Zacks Rank #1.

ManTech International Corporation MANT has an Earnings ESP of +8.11% and a Zacks Rank #2.

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