Oracle (ORCL 46.28, -0.31, -0.68%) will report second quarter results this
afternoon and management will give third quarter guidance on the call at 5:00
Investors are looking for an improved showing after the company missed revenue estimates two of the last three quarters. The company has also guided down revenue two quarters in a row.
The database software giant's growth lags peers as the company transitions from a license and maintenance model to subscription-based cloud services, putting pressure on margins.
Last quarter, total Cloud Services and License Support plus Cloud License and On-Premise License revenues grew only 2% to $7.5 bln. The company added $12 bln to its share repurchase program. In June, investors were turned off by changes to disclosures around its cloud segments, spurring growth concerns.
Oracle has guided for second quarter non-GAAP earnings per share (EPS) of $0.77-0.79 (vs. $0.70 last year) with revenue flat to down 2%, including a 200 basis point foreign exchange (FX) headwind, as of three months ago.
The Street expects second quarter results at the midpoint of guidance, with EPS up 11% and revenue down 1%. Estimates for the third quarter call for EPS up 1% with revenue up just under 1%.
Oracle has guided for revenue growth to improve in the second half of the year. The company has also guided for revenue growth and double-digit non-GAAP EPS growth in fiscal 2019. The Street expects fiscal 2019 EPS growth of only 8% with sales essentially flat.
Oracle stock is down slightly on the year. With a $176 bln market capitalization, the stock trades at ~14x EPS and ~11x FCF, which is a notable discount to almost every other software stock with superior growth including European rival SAP (SAP), which trades at ~19x EPS and FCF.
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