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Oracle's (ORCL) Q4 Earnings: Beat Depends on Cloud Revenues

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Oracle Inc. (ORCL - Free Report) is set to report fourth-quarter fiscal 2014 results on Jun 19, 2014. In the previous quarter, the company delivered a negative earnings surprise of 4.48%. On an average, Oracle has delivered positive earnings surprise of 1.44% in the last four quarters. Let’s see how things are shaping up for this quarter.

Growth Factors in the Past Quarter

Oracle reported disappointing third-quarter 2014, as both earnings and revenues missed the Zacks Consensus Estimate. However, management provided optimistic guidance for the fourth quarter, with earnings forecasted to be in the range of 92 to 99 cents per share much better than 87 cents reported in the year-ago quarter.

Revenues on a non-GAAP basis are expected to grow in the range of 3.0% to 7.0% (in dollar). Cloud subscription and new software license revenues (expected to range within 0.0% to 10.0%) are expected to be the key growth factors in the quarter. Growth in hardware (expected in the range of 0.0% to 10.0%) will be keenly watched by investors.

Oracle’s strong and innovative product portfolio and encouraging growth prospects in cloud and Big Data are the key positives. Moreover, higher subscription revenues are expected to provide a recurring high-margin revenue base. Nevertheless, competition from the likes of IBM, Workday and SAP AG (SAP - Free Report) remains a concern.

Earnings Whispers

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

Zacks ESP: Oracle currently has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 92 cents.

Zacks Rank: Oracle has a Zacks Rank #3 (Hold), which when combined with a 0.00% ESP, makes surprise prediction difficult.

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

Other Stocks to Consider

Here are a couple of stocks worth considering that, as per our model, have the right combination of elements to post an earnings beat this quarter:

Micron Technology (MU - Free Report) , Earnings ESP of +5.80% and a Zacks Rank #1 (Strong Buy).

FactSet Research (FDS - Free Report) , Earnings ESP of +2.38% and a Zacks Rank #2 (Buy).

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