Oracle Beats Expectations on 4th-Quarter 2017 Earnings

Earnings and revenue exceeded the company's guidance

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Oracle Corp. (NYSE:ORCL), the Redwood Shores, California-based global computer technology company, released the financial results for the fourth quarter of fiscal 2017 June 21.

The company closed the quarter in question that ended May 30 with an EPS – a non-GAAP measure – of 89 cents, an increase of nearly 9.9% year over year, and beat analysts’ expectations by 11 cents, as shown in the picture below. The difference between actual EPS and forecasted EPS produced a positive surprise of 14.10%.

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Source: Yahoo Finance

Earnings of the fourth quarter of fiscal 2017 are backed on revenue that came in at $10.9 billion, a 2.8% upside on a year-over-year basis, exclusive the revenues of approximately $8.2 billion that came in the quarter in question but are deferred as a positive component of income for fiscal year 2018.

Oracle beat consensus on fourth-quarter 2017 revenue by $450 million since the analysts forecasted the company would have invoiced customers for $10.45 billion.

On a non-GAAP basis and compared to revenues of one year ago, sales of cloud software as a service or SaaS increased to $1 billion by 75% and sales of cloud platform as a service (PaaS) plus sales of infrastructure as a service (IaaS) increased to $403 million by 42%, leading to a 64% upside year over year in revenue from total cloud item to $1.411 billion. Concerning the revenues that came in from total cloud plus on-premise software – which usually accounts for approximately 81% to 82% of Oracle’s total revenues, these were $8.934 billion in the fourth quarter of 2017, a 6% increase year over year.

Oracle co-CEO Safra Catz commented on the fourth quarter of fiscal 2017 results: "Our fourth-quarter results were very strong as revenue growth and earnings per share both substantially exceeded the high end of guidance." Catz also added the following: "We continue to experience rapid adoption of the Oracle Cloud led by the 75% growth in our SaaS business in the fourth quarter. This cloud hypergrowth is expanding our operating margins, and we expect earnings per share growth to accelerate in fiscal 2018."

And for fiscal 2018 Mark Hurd, a co-CEO of Oracle, is targeting sales to come in at substantially over the figure of $2 billion in new annually recurring cloud revenue (ARR).

The California-based global computer technology company closed the first quarter of fiscal 2017 with an operating margin – non-GAAP measure – of 46%, up 6% from the same ratio of the comparable quarter of the prior fiscal year.

The cash on hand and securities amount to $21.8 billion as of the fourth quarter of 2017 and the total debt to equity (MRQ) ratio is 104.74 versus an industry average of 41.57. An interest coverage ratio (TTM) of 11.18 says that Oracle can easily pay interest expenses on the outstanding debt.

Oracle is trading at $50.30 per share, and the stock hit a new 52-week high of $51.85 on June 22. The market capitalization is $206.97 billion, the price-earnings (P/E) ratio is 23.79, the price-book (P/B) ratio is 4.09 and the price-sales (P/S) ratio is 5.53.

The recommendation rating is 2.2 out of 5, and the target price per share is $53.46. The forward P/E ratio is 15.87 that, multiplied by a forecast EPS of $2.92 for fiscal 2018, gives us a value of $46.34.

Analysts foresee 8.60% growth for the next year and a 9.17% average annual growth for the next five years.

The company distributes to its shareholders an annual dividend of 76 cents through quarterly payments of 19 cents for a dividend yield of 1.51%. The next quarterly dividend will be paid on Aug. 2 to Oracle’s shareholders of record on July 19.

Approximately 2.99 billion shares outstanding out of a total 4.11 billion, is float. The percentage of Oracle’s shares outstanding held by insiders is 26.17% and by institutions is 61.50%.

Disclosure: I have no positions in Oracle.