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Why Is Oracle (ORCL) Down 3.8% Since the Last Earnings Report?
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A month has gone by since the last earnings report for Oracle Corporation (ORCL - Free Report) . Shares have lost about 3.8% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to their next earnings release, or is the stock due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Recent Earnings
Oracle delivered impressive third-quarter 2017 results. Earnings (including stock-based compensation) of $0.63 per share and revenues of $9.27 billion comfortably beat the Zacks Consensus Estimate of $0.57 and $9.24 billion, respectively.
Earnings (excluding stock-based compensation) increased 7.8% to $0.69 per share, which was within the company’s guided range of $0.61–$0.64. Unfavorable foreign currency impacted earnings by $0.01.
Revenue growth of almost 3% (4% in constant currency) was within management’s guided range of 3–5%. Adverse currency movements impacted total revenue by 1% in the quarter.
Top-line Details
Oracle’s top-line growth benefited from the ongoing cloud-based momentum. Total cloud revenue (13.6% of total revenue) soared 70.7% to $1.26 billion in the reported quarter.
Cloud SaaS and PaaS revenues advanced a significant 84.6% year over year to $1.08 billion, which was within management’s guided range of 82–86%. IaaS revenues increased 17.1% to $178 million.
Strong cloud results fully mitigated weak on-premise software revenues (67.5% of total revenue), which declined 2.7% to $6.18 billion. ERP, Fusion HCM and CX (customer experience) revenues gained 280%, 106% and 16%, respectively. Database as a Service was up a whopping 427% from the year-ago quarter. PaaS was up 375% year-to-date, with cloud services up 300%.
Total cloud and on-premise software revenue grew almost 5% in constant currency to $7.43 billion.
However, hardware revenues continued to decline in the quarter. Total hardware revenue slipped 9.4% year over year to $1.03 billion.
Services revenues increased 2.4% to $812 million.
Strong Bookings & Customer Additions
SaaS and PaaS infrastructure bookings were $322 million and $223 million, respectively in the quarter. Overall, cloud bookings jumped 73%. Oracle stated that SaaS and PaaS billings were up 111% on a year-over-year basis. The company added 1,125 new SaaS customers.
Oracle stated that 480 new customers bought CX. In HCM, the company had 206 new customers that include the likes of America Movil, Cedars-Sinai Medical Center, Ford, Emerson, Hilton, Hyundai Motor, Jefferies, Rogers Communications and others.
In ERP, the company added 564 new customers excluding NetSuite. Almost 50% of the new ERP customers were first-time users that indicated continuing market share gain against Workday .
Per the company, Active ERP customer base is now almost 3,700, with 1,465 live customers, 10 times that of Workday. The company has 13,103 customers in SaaS active base and 25,000 with NetSuite in total.
Operating Details
Total operating expenses (including stock-based compensation) as percentage of revenues increased 30 basis points (bps) to 60.1% in the reported quarter. The increase can primarily be attributed to higher cloud SaaS and PaaS, IaaS and research & development (R&D) expenses in the quarter, which were up 80 bps, 40 bps and 70 bps, respectively.
SaaS and PaaS gross margin was 65% significantly higher than 51% reported in the year-ago quarter. IaaS gross margin was 30% lower than management’s expectation due to continued investments.
Operating margin (including stock-based compensation) contracted 100 bps from the year-ago quarter to 38.5%.
Share Repurchase & Dividend
Oracle bought back 30 million shares for a total of $500 million in the third quarter. The company’s board of directors increased the quarterly dividend by 27% to $0.19 per share.
Guidance
For fourth-quarter fiscal 2017, total revenue is anticipated to grow in the range of (1%) to 2%. A strong U.S. dollar is expected to impact revenues by at least 2%. SaaS and PaaS revenue is anticipated to grow in the range of 69–73%. IaaS is expected to grow 25–29%.
Software and cloud revenue, including SaaS/PaaS and IaaS, new software license and software support is expected to grow 1–3%.
Earnings are anticipated to be between $0.78 and $0.82 for the quarter, with $0.02 per share impact from adverse currency headwind.
For fiscal 2017, Oracle now expects SaaS and PaaS revenues to grow 81% (up from earlier guidance of 80%). Moreover, management anticipates SaaS and PaaS gross margin to eventually rise to 80% in the long haul.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.
At this time, Oracle's stock has a subpar Growth Score of 'D', however its Momentum is lagging a bit '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 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is suitable solely for value investors.
Outlook
While estimates have been broadly trending downward for the stock, the magnitude of these revisions has been net zero. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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Why Is Oracle (ORCL) Down 3.8% Since the Last Earnings Report?
A month has gone by since the last earnings report for Oracle Corporation (ORCL - Free Report) . Shares have lost about 3.8% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to their next earnings release, or is the stock due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Recent Earnings
Oracle delivered impressive third-quarter 2017 results. Earnings (including stock-based compensation) of $0.63 per share and revenues of $9.27 billion comfortably beat the Zacks Consensus Estimate of $0.57 and $9.24 billion, respectively.
Earnings (excluding stock-based compensation) increased 7.8% to $0.69 per share, which was within the company’s guided range of $0.61–$0.64. Unfavorable foreign currency impacted earnings by $0.01.
Revenue growth of almost 3% (4% in constant currency) was within management’s guided range of 3–5%. Adverse currency movements impacted total revenue by 1% in the quarter.
Top-line Details
Oracle’s top-line growth benefited from the ongoing cloud-based momentum. Total cloud revenue (13.6% of total revenue) soared 70.7% to $1.26 billion in the reported quarter.
Cloud SaaS and PaaS revenues advanced a significant 84.6% year over year to $1.08 billion, which was within management’s guided range of 82–86%. IaaS revenues increased 17.1% to $178 million.
Strong cloud results fully mitigated weak on-premise software revenues (67.5% of total revenue), which declined 2.7% to $6.18 billion. ERP, Fusion HCM and CX (customer experience) revenues gained 280%, 106% and 16%, respectively. Database as a Service was up a whopping 427% from the year-ago quarter. PaaS was up 375% year-to-date, with cloud services up 300%.
Total cloud and on-premise software revenue grew almost 5% in constant currency to $7.43 billion.
However, hardware revenues continued to decline in the quarter. Total hardware revenue slipped 9.4% year over year to $1.03 billion.
Services revenues increased 2.4% to $812 million.
Strong Bookings & Customer Additions
SaaS and PaaS infrastructure bookings were $322 million and $223 million, respectively in the quarter. Overall, cloud bookings jumped 73%. Oracle stated that SaaS and PaaS billings were up 111% on a year-over-year basis. The company added 1,125 new SaaS customers.
Oracle stated that 480 new customers bought CX. In HCM, the company had 206 new customers that include the likes of America Movil, Cedars-Sinai Medical Center, Ford, Emerson, Hilton, Hyundai Motor, Jefferies, Rogers Communications and others.
In ERP, the company added 564 new customers excluding NetSuite. Almost 50% of the new ERP customers were first-time users that indicated continuing market share gain against Workday .
Per the company, Active ERP customer base is now almost 3,700, with 1,465 live customers, 10 times that of Workday. The company has 13,103 customers in SaaS active base and 25,000 with NetSuite in total.
Operating Details
Total operating expenses (including stock-based compensation) as percentage of revenues increased 30 basis points (bps) to 60.1% in the reported quarter. The increase can primarily be attributed to higher cloud SaaS and PaaS, IaaS and research & development (R&D) expenses in the quarter, which were up 80 bps, 40 bps and 70 bps, respectively.
SaaS and PaaS gross margin was 65% significantly higher than 51% reported in the year-ago quarter. IaaS gross margin was 30% lower than management’s expectation due to continued investments.
Operating margin (including stock-based compensation) contracted 100 bps from the year-ago quarter to 38.5%.
Share Repurchase & Dividend
Oracle bought back 30 million shares for a total of $500 million in the third quarter. The company’s board of directors increased the quarterly dividend by 27% to $0.19 per share.
Guidance
For fourth-quarter fiscal 2017, total revenue is anticipated to grow in the range of (1%) to 2%. A strong U.S. dollar is expected to impact revenues by at least 2%. SaaS and PaaS revenue is anticipated to grow in the range of 69–73%. IaaS is expected to grow 25–29%.
Software and cloud revenue, including SaaS/PaaS and IaaS, new software license and software support is expected to grow 1–3%.
Earnings are anticipated to be between $0.78 and $0.82 for the quarter, with $0.02 per share impact from adverse currency headwind.
For fiscal 2017, Oracle now expects SaaS and PaaS revenues to grow 81% (up from earlier guidance of 80%). Moreover, management anticipates SaaS and PaaS gross margin to eventually rise to 80% in the long haul.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.
Oracle Corporation Price and Consensus
Oracle Corporation Price and Consensus | Oracle Corporation Quote
VGM Scores
At this time, Oracle's stock has a subpar Growth Score of 'D', however its Momentum is lagging a bit '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 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is suitable solely for value investors.
Outlook
While estimates have been broadly trending downward for the stock, the magnitude of these revisions has been net zero. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.