Oracle Stock Is Sky High From Better-Than-Expected Earnings Per Share

Shares of database software giant Oracle took a leap forward this week after the firm released an earnings report indicating better-than-expected gains in its transition to cloud computing.  The company reported fiscal fourth-quarter results after market close on Wednesday, which helped the stock jump more than 8 percent to close at $56.99, Thursday. This pushed the stock out of what had been a steady base and above the buy point of $55.63.

That in mind, Oracle reported revenue of $11.3 billion, besting Wall Street’s estimates of $10.95 billion by nearly 2 percent for the first quarter.  Specifically, Oracle’s Cloud Services and License Support business unit did $6.8 billion, bettering analyst estimates of $6.76 billion.  But even with such impressive results, revenue guidance for fiscal first quarter—at merely 1 percent—came in slightly below estimates; earnings guidance of only 81 cents slightly rising.

Another way to look at this is that Oracle reported an adjusted Earnings-Per-Share of $1.16 for fiscal fourth quarter. This EPS definitely beat analyst expectations of $1.07 by a little more than 8 percent. It also beat the previous year’s EPS by more than 22 percent.  Oracle says that revenue from Fusion and NetSuite cloud application businesses is leading the growth. 

The conflicting numbers are certainly representative of the fact that Oracle is undergoing a shift in its portfolio. Effectively, the company is moving away from their traditional model of licensing and maintenance and towards a subscription-based business aimed at cloud computing.  The hope, of course, is to earn a more sustainable profit margin. 

It appears that market analysts agree:  Oracle has been performing well but muted results in the most recent quarters are not encouraging any big moves.  Most analysts would recommend waiting to see more consistent evidence of sustained growth throughout its cloud business lines.

It might also help to compare Oracle’s progress this year with one of their biggest peers, Symantec.  Symantec’s revenue dragged behind analyst estimates by 1.2 percent in fiscal 2019 fourth quarter.  Year-over-year revenue for Symantec is also down 3.2 percent. On the other hand, software behemoth Microsoft reported better YOY revenue for fiscal 2019 third quarter.