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Oracle (ORCL) Q1 Earnings & Revenues Top Estimates, Stock Up

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Oracle (ORCL - Free Report) reported first-quarter fiscal 2021 non-GAAP earnings of 93 cents per share, beating the Zacks Consensus Estimate by 8.14%. Further, the bottom line was up 15% from the year-ago quarter (up 14% at constant currency or cc). Further, the reported figure surpassed the higher end of management’s guided range of 85-89 cents.

Moreover, non-GAAP revenues improved 2% (up 2% at cc) year over year to $9.368 billion, outpacing the Zacks Consensus Estimate by 2.39%. For first-quarter fiscal 2021, Oracle had anticipated total revenue growth rate on a year-over-year basis in the range of (1%) to 1% at USD and 0-2% at cc.

Management refrained from making any comments on speculation regarding acquisition of TikTok. It must be noted that on Sep 10, President Donald Trump said to reporters, that the deadline set for China-based, ByteDance to sell TikTok’s U.S. assets and finalize the deal by Sep 20, would not be stretched further, as revealed in Reuters article.

Stock Up On Encouraging Q2 Guidance

Notably, shares of Oracle were up more than 3% in the pre-market trading on Sep 11, following stellar fiscal first-quarter top-line performance and encouraging outlook for fiscal second quarter.

For second-quarter fiscal 2021, Oracle anticipates total revenue growth rate on a year-over-year basis in the range of 1-3% at USD and 0-2% at cc. The Zacks Consensus Estimate for revenues is pegged at 9.56 billion, indicating a decline of 0.5% on a year-over-year basis.

Oracle expects non-GAAP earnings per share between 98 cents and $1.02 at USD, and 96 cents and $1 at cc. The Zacks Consensus Estimate for the same is pegged at 94 cents per share.

On a year-to-date basis, the company’s shares have returned 8.2%, compared with the industry’s rally of 28.2%.

Top Line in Detail

Oracle reported total revenues (on a GAAP basis) of $9.367 billion, up 2% (up 2% at cc) year over year, primarily led by improvement in cloud business.

Revenues by Offerings

Oracle’s top line benefited from the ongoing cloud-based momentum. Cloud services and license support revenues (74% of total revenues) in the reported quarter increased 2% year over year (up 2% at cc) to $6.947 billion.

Break up of Cloud services and license support revenues

Applications revenues (contributed 40.5% to total cloud services and license support revenues) amounted to $2.816 billion, up 4% year over year (up 4% at cc).

Infrastructure related revenues (59.5%) were $4.131 billion, up 1% on a year-over-year basis (up 1% at cc).

Meanwhile, Cloud license and on-premise license revenues (9%) improved 9% year over year (up 8% at cc) to $886 million.

Hardware revenues (9%) were $814 million, flat (flat at cc) on a year-over-year basis.

Services revenues (8%) declined 8% (down 8% at cc) to $720 million.

Revenues by Geography

Revenues from Americas (representing 54.1% of total revenues) declined 1.6% year over year to $5.068 billion.

Revenues from Europe/Middle East/Africa (29.2%) improved 7.2% from the year-ago quarter’s figure to $2.738 billion.

Revenues from Asia Pacific (16.7%) increased 3% from the year-ago quarter level to $1.561 billion.

Expanding Clientele Holds Promise

Management announced that Fusion HCM, NetSuite ERP and Fusion ERP businesses were up 22%, 23% and 33%, respectively, in the fiscal first quarter. Fusion ERP has customer strength of more than 7,000.

Fusion app business improved 26% with surge in Fusion retention rates. Markedly, autonomous database consumption revenues improved 64% and annualized consumption revenue for Oracle Cloud Infrastructure (OCI) services soared 130%.

Additionally, the company is witnessing strong growth in Cloud HCM, which is increasingly being purchased as part of the company’s ERP cloud application suite. Further, the migration of several midsized SAP customers to Fusion ERP and Fusion HCM remains a tailwind.

Oracle Corporation Price, Consensus and EPS Surprise

Oracle Corporation Price, Consensus and EPS Surprise

Oracle Corporation price-consensus-eps-surprise-chart | Oracle Corporation Quote

Expanding clientele is enabling the company to maintain leading position in cloud ERP market. Management is optimistic on latest ERP deal wins from companies including ICON Health & Fitness, DHL Supply Chain, Iron Mountain, and CTB, a Berkshire Hathaway Company. Key HCM wins include Albertsons, Randstad India, and skeyes.

Moreover, the next-generation autonomous database launched by Oracle, supported by ML, is gaining traction. In the reported quarter, Oracle added new Autonomous Database cloud customers. New product introductions are likely to bolster growth in this category. Markedly, autonomous database in Gen2 public cloud infrastructure is witnessing rapid adoption.

Oracle’s latest Exadata Cloud@Customer service offering is also gaining traction among on-premise customers.

Noteworthy deal wins of OCI and autonomous database during the reported quarter include Xactly, United Breweries of India, Safaricom PLC, Schneider Electric, McDonald’s, Rinna, Polycab India, Arterra Wines Canada, and Lahore University of Management Sciences.

Management remains optimistic that Zoom Video Communications (ZM - Free Report) and 8x8 (EGHT - Free Report) are utilizing OCI services to enhance video meeting solutions in a secure manner amid explosive growth in user base.

Oracle, currently carrying a Zacks Rank #3 (Hold), is making every effort to enhance functionalities of cloud-based applications, which is encouraging adoption. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

These initiatives are expected to provide the company an edge in the Database-as-a-Service market and reinforce its competitive position against Amazon’s (AMZN - Free Report) Amazon Web Services.

Operating Details

Non-GAAP operating expenses fell 4% year over year (down 3% at cc) to $5.19 billion. As a percentage of non-GAAP revenues, the figure contracted 290 basis points (bps) to 55.4%.

Non-GAAP operating income during the reported quarter was $4.178 billion, up 9% year over year (up 8% at cc).

Non-GAAP operating margin expanded 293 bps (expanded 268 bps at cc) on a year-over-year basis to 45%.

Balance Sheet & Cash Flow

As of Aug 31, 2020, Oracle had cash & cash equivalents, and marketable securities of $42.279 billion, compared with $43.057 billion as of May 21, 2020.

Operating cash flow and free cash flow for the 12 months ended May 21, 2020 came in at $13.092 billion and $11.478 billion, respectively.

Share Repurchases & Dividends

Oracle repurchased 90 million shares worth approximately $5 billion during the fiscal first quarter and paid out dividends worth $3 billion during the 12 months ended Aug 31, 2020.

Over the past 12 months, the company has repurchased 361 million shares worth $19.2 billion. Over the last 10 years, Oracle has reduced the shares outstanding by nearly 40%.

On Sep 10, 2020, the company declared a quarterly dividend of 24 cents per share, payable on Oct 22, 2020, to shareholders as on Oct 8, 2020.

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