California based Oracle Corporation (ORCL, Financial), is one of the biggest database software companies of the world and is all set to declare its third quarter results on March 17, 2015 post market close. The Company had declared a better than expected second quarter beating the street expectation by a penny and ending a streak of narrowly missed expectation track record of past few quarters. The market is expecting Oracle to reveal valuable insights into the enterprise technology spends pattern. Under the evolving market scenario, Oracle is undergoing a difficult transition of selling its software over the cloud platform rather than installing a licence version on individual machines.
Street expectation
Analysts feel that the strengthening dollar is going to impact the earnings adversely.Despite the currency headwinds, Oracle Corporation is expected to report a 2% rise in third-quarter profit. The general consensus forecast stands close to 9.5 billion, the earnings forecast figure $0.64-0.68 a share and the company is expected to announce a 2% rise in the profits for this quarter. Oracle’s sequential revenue is expected to be marginally higher in this quarter.
In the corresponding quarter of last year, Oracle had posted an EPS of $0.68 and $9.32 billion in revenues.
Analyst at Credit Suisse (CS, Financial) have given an outperform guidance for Oracle at a price target of $47.50. The outperform guidance has been arrived at by considering four key growth drivers:
- A potential for additional improvements in sales force performance.
- Adoption and implementation of the In-Memory option of Oracle Database 12c.
- Incremental increase in customer adoption of Oracle Fusion Applications and
- The enormous market opportunity for Engineered Systems.
Analysts at BMO have also reiterated an Outperform rating with a price target of $49. Here the analysts feel that despite the limited exposure to Saas, Oracle stands to benefit from a stable stream of licence and associated maintenance revenue from Database / Middleware. This situation will help it overcome the transition risk in the near future. The analysts feel that Database should be able support continued low single digit normalized growth. It is also expected that Oracle’s shift to Saas should shift the focus from margins to operating profit and FCF. Deutsche Bank (DB, Financial) has put a Hold rating and a price target of $44. Oracle had issued a guidance of software revenue growth of 5% to 8% as against 8% in the second quarter of 2015. This implies a negative licence growth of approximately 1% against a flat figure in the second quarter of 2015. If one excludes acquisition of MICROS, DataLogix, Bluekai and Responsys, the previous guidance implies an organic growth of the total revenues of 1% to 2%.
Stock performance
The consensus price target of Oracle stands at $45.43 which is very close to it higher mark of the stocks 52 weeks trading record. The stock is currently trading at $43 level which is higher as compared to March 2014 share price of $39. The share price had surpassed the $46 mark towards the beginning of this year. Oracle is considered as one of the mature tech companies with low dividend yield.
Conclusion
Although this quarter may look pale as compared to the surprisingly better than estimated numbers in the previous quarter, the investment in technological upgrades and successful transition to the cloud platform is expected to transform into growing revenues in the upcoming quarters impacting the annual numbers in a visible way.
