Bracing For Oracle Earnings (ORCL)

Oracle Corp. (NASDAQ: ORCL) is set to report earnings after the close of trading today.  The enterprise software giant is expected to post non-GAAP earnings of $0.32 EPS and $5.45 billion in revenue according to Thomson Reuters (First Call).  The actual report might not matter as much as what Larry Ellison and friends have to say about the economic environment.
Non-GAAP expectations are $0.46 EPS and $6.96 billion in revenue.  For the fiscal year, also May-2009, the estimates are $1.40 EPS and $23.47 billion in revenue.  So with a $15.60 price and almost $80 billion market cap, Oracle trades at an estimated 11+ times earnings and just over 3-times revenues.

This stock was hit along with the rest of the tech sector, although with a 52-week trading range of $13.80 to $23.60 it has amazingly held up better than competitors.  The lows were just on March 9, but if you smooth the effects of that day it looks like Oracle hasn’t responded as strongly as the overall market.

It looks the action is in the call options, and these expire in just two days.  Based upon current pricing, there is only an expected move of $0.70 to $0.80 being priced into this stock for the earnings report.

Even though most of the recent analyst calls have been cautious, the implied price target from the analyst community is around $20.00 per share.  That implies more than 25% upside.

Here is what we know… Enterprise customer technology spending is down.  In some cases, way down.  The ability to land new customers has to be difficult right now.  And these consensus estimates actually show growth.  Oracle has already cautioned that the dollar’s recent strength is hurting its numbers.  It has also conducted some layoffs which could grow in the current climate.

It is hard to expect Larry Ellison to stand up today and offer any rosy growth forecasts.  And the market has to have figured that out.  Its chart would definitely indicate that.

JON C. OGG