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Oracle (ORCL) Lags on Q4 Earnings, Stock Up on Sales Beat
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Oracle Corp.’s (ORCL - Free Report) fourth-quarter fiscal 2016 adjusted earnings of 76 cents missed the Zacks Consensus Estimate by a penny. Nonetheless, earnings were better than 74 cents reported in the year-ago quarter.
Adverse currency translations owing to the strengthening of the U.S. dollar weighed on the company’s financials in this quarter as well.
Following the results, shares nearly rose 2% in afterhours trading yesterday driven by the strength in the company’s top line, which was fueled by its cloud performance.
Revenues though down 1% on a year-over-year basis to $10.59 billion were ahead of the Zacks Consensus Estimate of $10.51 billion. On a constant currency basis, revenues remained flat year over year.
Total cloud and on-premise software revenues remained flat at $8.4 billion, while excluding currency effects, it grew 2%. Total cloud revenues, including infrastructure as a service (IaaS), were up 49% (up 51% on constant currency basis) to $859 million while on-premise software revenues were down 3% (down 2% on constant currency basis) to $7.6 billion.
Total hardware revenues tanked 9% year over year (down 7% on constant currency) to $1.3 billion. Services revenues were also down 3% (down 1% on constant currency basis) to $872 million.
Cloud SaaS and PaaS revenues jumped 66% year over year (up 68% on constant currency) to $690 million.
Oracle stated that SaaS and PaaS billings were up 38% year over year. In the reported quarter, the company added 1,600 SaaS customers and over 2000 PaaS customers. In addition, the company added another 800 customers on Fusion ERP, bringing the total client base to 2,600.
Margins
Total operating expenses declined 1% (flat on constant currency) from the year-ago quarter to $6.6 billion.
Adjusted operating margin contracted 149 basis points (bps) year over year to 37%.
Liquidity
Oracle’s cash and marketable securities were $56.1 billion as of May 31, 2016, compared with $54.4 billion as of May 31, 2015.
Operating cash flow for the fiscal was $13.6 billion while capital expenditures were $1.2 billion. Free cash flow was $12.4 billion in fiscal 2016.
Guidance
The company provided guidance for the first quarter and fiscal 2017.
For the first-quarter of fiscal 2017, total revenue is expected to grow in the range of 2% to 5%. Non-GAAP earnings per share are expected in the range of 56 to 60 cents, on a constant currency basis. SaaS and PaaS revenue is expected to grow in the range of 75% to 80%. The guidance includes benefits from its acquisitions and improved strength in the organic business.
For fiscal 2017, Oracle expects SaaS and PaaS revenue to cross the 65% growth rate (up from 62% in fiscal 2016). It also anticipates SaaS and PaaS gross margin to be higher than 57% by the end of fiscal 2017.
Our Take
Oracle, which already enjoys a leading position in the enterprise software and database management system (DBMS) software market, has also been gaining ground on its cloud endeavors. Specifically, the company’s offerings in SaaS, PaaS and Big Data divisions have gained significant momentum in the past few quarters.
In the fourth quarter, there were a number of developments in Oracle’s business, both cloud and database related. The company introduced some novel cloud solutions in March to enable it to help organizations in transitioning their operations from on-premise to cloud. In addition, it launched VSM 7, a data protection solution for main frame and heterogeneous systems that will enable systems to seamlessly tier with public cloud. We expect the company’s top line to benefit from these new offerings going forward.
Apart from this, Oracle also joined forces with General Electric (GE - Free Report) in order to co-develop a cutting edge platform that would enable the companies to digitally connect industrial assets across the world.
However, for the last few months, the company has been entangled in one lawsuit after another, which remains an overhang on its financials. In May, Oracle lost its six-year old lawsuit against Alphabet (GOOGL - Free Report) . This apart, the company is still undergoing a transition from licensing, to cloud subscription model, which will adversely impact its revenues in the near term.
Also, stiff competition from the likes of Google, IBM (IBM - Free Report) and Amazon.com, Inc.’s AWS remains a concern.
Currently, Oracle has a Zacks Rank #3 (Hold).
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Oracle (ORCL) Lags on Q4 Earnings, Stock Up on Sales Beat
Oracle Corp.’s (ORCL - Free Report) fourth-quarter fiscal 2016 adjusted earnings of 76 cents missed the Zacks Consensus Estimate by a penny. Nonetheless, earnings were better than 74 cents reported in the year-ago quarter.
Adverse currency translations owing to the strengthening of the U.S. dollar weighed on the company’s financials in this quarter as well.
Following the results, shares nearly rose 2% in afterhours trading yesterday driven by the strength in the company’s top line, which was fueled by its cloud performance.
ORACLE CORP Price, Consensus and EPS Surprise
ORACLE CORP Price, Consensus and EPS Surprise | ORACLE CORP Quote
Revenues
Revenues though down 1% on a year-over-year basis to $10.59 billion were ahead of the Zacks Consensus Estimate of $10.51 billion. On a constant currency basis, revenues remained flat year over year.
Total cloud and on-premise software revenues remained flat at $8.4 billion, while excluding currency effects, it grew 2%. Total cloud revenues, including infrastructure as a service (IaaS), were up 49% (up 51% on constant currency basis) to $859 million while on-premise software revenues were down 3% (down 2% on constant currency basis) to $7.6 billion.
Total hardware revenues tanked 9% year over year (down 7% on constant currency) to $1.3 billion. Services revenues were also down 3% (down 1% on constant currency basis) to $872 million.
Cloud SaaS and PaaS revenues jumped 66% year over year (up 68% on constant currency) to $690 million.
Oracle stated that SaaS and PaaS billings were up 38% year over year. In the reported quarter, the company added 1,600 SaaS customers and over 2000 PaaS customers. In addition, the company added another 800 customers on Fusion ERP, bringing the total client base to 2,600.
Margins
Total operating expenses declined 1% (flat on constant currency) from the year-ago quarter to $6.6 billion.
Adjusted operating margin contracted 149 basis points (bps) year over year to 37%.
Liquidity
Oracle’s cash and marketable securities were $56.1 billion as of May 31, 2016, compared with $54.4 billion as of May 31, 2015.
Operating cash flow for the fiscal was $13.6 billion while capital expenditures were $1.2 billion. Free cash flow was $12.4 billion in fiscal 2016.
Guidance
The company provided guidance for the first quarter and fiscal 2017.
For the first-quarter of fiscal 2017, total revenue is expected to grow in the range of 2% to 5%. Non-GAAP earnings per share are expected in the range of 56 to 60 cents, on a constant currency basis. SaaS and PaaS revenue is expected to grow in the range of 75% to 80%. The guidance includes benefits from its acquisitions and improved strength in the organic business.
For fiscal 2017, Oracle expects SaaS and PaaS revenue to cross the 65% growth rate (up from 62% in fiscal 2016). It also anticipates SaaS and PaaS gross margin to be higher than 57% by the end of fiscal 2017.
Our Take
Oracle, which already enjoys a leading position in the enterprise software and database management system (DBMS) software market, has also been gaining ground on its cloud endeavors. Specifically, the company’s offerings in SaaS, PaaS and Big Data divisions have gained significant momentum in the past few quarters.
In the fourth quarter, there were a number of developments in Oracle’s business, both cloud and database related. The company introduced some novel cloud solutions in March to enable it to help organizations in transitioning their operations from on-premise to cloud. In addition, it launched VSM 7, a data protection solution for main frame and heterogeneous systems that will enable systems to seamlessly tier with public cloud. We expect the company’s top line to benefit from these new offerings going forward.
Apart from this, Oracle also joined forces with General Electric (GE - Free Report) in order to co-develop a cutting edge platform that would enable the companies to digitally connect industrial assets across the world.
However, for the last few months, the company has been entangled in one lawsuit after another, which remains an overhang on its financials. In May, Oracle lost its six-year old lawsuit against Alphabet (GOOGL - Free Report) . This apart, the company is still undergoing a transition from licensing, to cloud subscription model, which will adversely impact its revenues in the near term.
Also, stiff competition from the likes of Google, IBM (IBM - Free Report) and Amazon.com, Inc.’s AWS remains a concern.
Currently, Oracle has a Zacks Rank #3 (Hold).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>