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Oracle (ORCL) Down 17.9% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Oracle (ORCL - Free Report) . Shares have lost about 17.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Oracle due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Oracle Q1 Earnings Miss Estimates, Revenues Rise
Oracle reported first-quarter fiscal 2023 non-GAAP earnings of $1.03 per share, which missed the Zacks Consensus Estimate for earnings by 3.74%. The bottom line remained unchanged year over year (up 8% at constant currency or cc).
Management had guided non-GAAP earnings per share (EPS) to grow in the range of 1-5% year over year at cc and be in the band of $1.04-$1.08 per share.
Revenues increased 18% (up 23% at cc) year over year to $11.44 billion but missed the Zacks Consensus Estimate by 0.2%. The top-line performance was mainly driven by strength in the cloud business.
For the fiscal first quarter, Oracle had anticipated total revenues to grow in the range of 17-19% year over year at USD and 20-22% at cc.
Revenues by Offerings
Oracle’s Cloud services and license support revenues (73% of total revenues) in the reported quarter increased 14% year over year (up 20% at cc) to $8.41 billion. The upside can be attributed to continued strength in the Fusion, Autonomous Database and Oracle Cloud Infrastructure (“OCI”) services.
Breakup of Cloud Services & License Support Revenues
Applications revenues (contributed 47.7% to total cloud services and license support revenues) amounted to $4.01 billion, up 32% year over year (up 37% at cc).
Infrastructure-related revenues (52.3% of total cloud services and license support revenues) were $4.4 billion, up 2% on a year-over-year basis (up 7% at cc).
Cloud license and on-premise license revenues (8% of total revenues) increased 11% year over year (up 19% at cc) to $904 million.
Hardware revenues (7% of total revenues) were $763 million, which remained unchanged year over year, (up 5% at cc).
Services revenues (12% of total revenues) rose 74% (up 84% at cc) to $1.36 billion.
Revenues by Geography
Revenues from the Americas (representing 62.8% of total revenues) increased 35.2% year over year to $7.192 billion.
Revenues from Europe/Middle East/Africa (23.5%) declined 3.3% from the year-ago quarter figure to $2.69 billion.
Revenues from the Asia Pacific (13.6%) declined 3.8% from the year-ago quarter level to $1.856 billion.
Expanding Clientele Remains Noteworthy
Management noted that the strategic back-office cloud applications business increased 33% at cc and now has $5.8 billion in annualized revenues. Management noted that revenues from Fusion ERP, Fusion HCM and NetSuite ERP were up 38%, 26% and 30%, respectively.
Consumption revenues for OCI services, which include Autonomous Database, soared 103% at cc. Cloud customer consumption revenues increased 92% year over year.
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 large-scale SAP customers to Fusion ERP cloud and Fusion HCM remains a tailwind.
Expanding clientele is enabling the company to maintain its leading position in the cloud ERP market. Management is optimistic regarding the latest Oracle Fusion Cloud ERP, HCM and EPM applications.
The next-generation autonomous database launched by Oracle, supported by ML, is witnessing steady traction. New product introductions, including new OCI managed services, are likely to boost growth in this category. The autonomous database in Gen2 public cloud infrastructure is witnessing a healthy uptake.
Oracle’s latest Exadata Cloud@Customer service offering is gaining traction among on-premise customers. The latest wins include Deutsche Bank, City of Atlanta and State of Kansas.
Some noteworthy deal wins for OCI during the reported quarter are ABN AMRO, Generalli, Data Intensity and Informatica among others.
Operating Details
Non-GAAP total operating expenses increased 8% year over year (up 11% at cc) to $6.25 billion.
Non-GAAP operating income during the reported quarter was $5.59 billion, up 3% year over year (up 8% at cc).
Non-GAAP operating margin contracted 123 basis points (bps) on a year-over-year basis to 47%.
Balance Sheet & Cash Flow
As of Aug 31, 2022, Oracle had cash & cash equivalents and marketable securities of $10.44 billion compared with $21.8 billion as of May 31, 2022.
Operating cash flow and free cash flow for the trailing 12 months ended Aug 31, 2022 amounted to $10.54 billion and $5.37 billion, respectively.
Share Repurchases & Dividends
Oracle repurchased 7.5 million shares, worth approximately $599 million, during the fiscal first quarter.
The board of directors declared a quarterly cash dividend of $0.32 per share of outstanding common stock. This dividend will be paid out to stockholders of record, after the close of business on Oct 12, 2022, with a payment date of Oct 25, 2022.
Q2 Guidance
For second-quarter fiscal 2023, total revenues, including Cerner, are expected to grow between 21% and 23% in cc and 15% and 17% in USD.
Total cloud growth, again including Cerner, is expected to grow in the range of 46% to 50% in cc and 42% to 46% in USD.
Non-GAAP EPS is expected to grow 1% to 5% and be between $1.23 and $1.27 in constant currency due to currency headwinds. Non-GAAP EPS is expected to decline 1% to 5% and be between $1.16 and $1.20.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -8.93% due to these changes.
VGM Scores
At this time, Oracle has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Oracle has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Oracle (ORCL) Down 17.9% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Oracle (ORCL - Free Report) . Shares have lost about 17.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Oracle due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Oracle Q1 Earnings Miss Estimates, Revenues Rise
Oracle reported first-quarter fiscal 2023 non-GAAP earnings of $1.03 per share, which missed the Zacks Consensus Estimate for earnings by 3.74%. The bottom line remained unchanged year over year (up 8% at constant currency or cc).
Management had guided non-GAAP earnings per share (EPS) to grow in the range of 1-5% year over year at cc and be in the band of $1.04-$1.08 per share.
Revenues increased 18% (up 23% at cc) year over year to $11.44 billion but missed the Zacks Consensus Estimate by 0.2%. The top-line performance was mainly driven by strength in the cloud business.
For the fiscal first quarter, Oracle had anticipated total revenues to grow in the range of 17-19% year over year at USD and 20-22% at cc.
Revenues by Offerings
Oracle’s Cloud services and license support revenues (73% of total revenues) in the reported quarter increased 14% year over year (up 20% at cc) to $8.41 billion. The upside can be attributed to continued strength in the Fusion, Autonomous Database and Oracle Cloud Infrastructure (“OCI”) services.
Breakup of Cloud Services & License Support Revenues
Applications revenues (contributed 47.7% to total cloud services and license support revenues) amounted to $4.01 billion, up 32% year over year (up 37% at cc).
Infrastructure-related revenues (52.3% of total cloud services and license support revenues) were $4.4 billion, up 2% on a year-over-year basis (up 7% at cc).
Cloud license and on-premise license revenues (8% of total revenues) increased 11% year over year (up 19% at cc) to $904 million.
Hardware revenues (7% of total revenues) were $763 million, which remained unchanged year over year, (up 5% at cc).
Services revenues (12% of total revenues) rose 74% (up 84% at cc) to $1.36 billion.
Revenues by Geography
Revenues from the Americas (representing 62.8% of total revenues) increased 35.2% year over year to $7.192 billion.
Revenues from Europe/Middle East/Africa (23.5%) declined 3.3% from the year-ago quarter figure to $2.69 billion.
Revenues from the Asia Pacific (13.6%) declined 3.8% from the year-ago quarter level to $1.856 billion.
Expanding Clientele Remains Noteworthy
Management noted that the strategic back-office cloud applications business increased 33% at cc and now has $5.8 billion in annualized revenues. Management noted that revenues from Fusion ERP, Fusion HCM and NetSuite ERP were up 38%, 26% and 30%, respectively.
Consumption revenues for OCI services, which include Autonomous Database, soared 103% at cc. Cloud customer consumption revenues increased 92% year over year.
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 large-scale SAP customers to Fusion ERP cloud and Fusion HCM remains a tailwind.
Expanding clientele is enabling the company to maintain its leading position in the cloud ERP market. Management is optimistic regarding the latest Oracle Fusion Cloud ERP, HCM and EPM applications.
The next-generation autonomous database launched by Oracle, supported by ML, is witnessing steady traction. New product introductions, including new OCI managed services, are likely to boost growth in this category. The autonomous database in Gen2 public cloud infrastructure is witnessing a healthy uptake.
Oracle’s latest Exadata Cloud@Customer service offering is gaining traction among on-premise customers. The latest wins include Deutsche Bank, City of Atlanta and State of Kansas.
Some noteworthy deal wins for OCI during the reported quarter are ABN AMRO, Generalli, Data Intensity and Informatica among others.
Operating Details
Non-GAAP total operating expenses increased 8% year over year (up 11% at cc) to $6.25 billion.
Non-GAAP operating income during the reported quarter was $5.59 billion, up 3% year over year (up 8% at cc).
Non-GAAP operating margin contracted 123 basis points (bps) on a year-over-year basis to 47%.
Balance Sheet & Cash Flow
As of Aug 31, 2022, Oracle had cash & cash equivalents and marketable securities of $10.44 billion compared with $21.8 billion as of May 31, 2022.
Operating cash flow and free cash flow for the trailing 12 months ended Aug 31, 2022 amounted to $10.54 billion and $5.37 billion, respectively.
Share Repurchases & Dividends
Oracle repurchased 7.5 million shares, worth approximately $599 million, during the fiscal first quarter.
The board of directors declared a quarterly cash dividend of $0.32 per share of outstanding common stock. This dividend will be paid out to stockholders of record, after the close of business on Oct 12, 2022, with a payment date of Oct 25, 2022.
Q2 Guidance
For second-quarter fiscal 2023, total revenues, including Cerner, are expected to grow between 21% and 23% in cc and 15% and 17% in USD.
Total cloud growth, again including Cerner, is expected to grow in the range of 46% to 50% in cc and 42% to 46% in USD.
Non-GAAP EPS is expected to grow 1% to 5% and be between $1.23 and $1.27 in constant currency due to currency headwinds. Non-GAAP EPS is expected to decline 1% to 5% and be between $1.16 and $1.20.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -8.93% due to these changes.
VGM Scores
At this time, Oracle has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Oracle has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.