Oracle Beats on Revenue; Earnings One-Cent Shy
Redwood City, California-based Oracle Corp. (NYSE: ORCL – $38.64) announced total fourth quarter revenue of $10.6 billion, down 1% in U.S. dollars and flat in constant currency from last year, but ahead of Street estimates of $10.5 billion. Cloud plus On-Premise Software sales were $8.4 billion, flat in U.S. dollars and up 2% in constant currency. Cloud software as a service and platform as a service revenues soared to $690 million, up 66% in U.S. dollars and up 68% in constant currency. Total cloud revenues, including infrastructure as a service, were $859 million, up 49% in U.S. dollars and up 51% in constant currency. Oracle’s conventional software business, which carries higher margins, continues to wither. Revenue from new software licenses fell 12% to $2.77 billion in the quarter, or 10% lower in constant currency. Adjusted earnings for Oracle was $4.8 billion for the fourth period with an operating margin of 45% and earnings per share settled at $0.81, a penny shy of consensus estimates, but above the $0.78 earned a year-ago. For the full year, ORCL earned $2.61 per share and is currently valued at about 15 times trailing earnings and 13.7 times estimated fiscal 2017 earnings. The company maintained its quarterly $0.15 per share dividend, yielding 1.6%.
The developer of database and application software has its work cut out for it as it transitions from a server-based licensed software and services provider to cloud computing and runs up against some strong currency headwinds. However, I believe Oracle still offers respectable, risk-adjusted returns, as the company, in my opinion, is well-positioned to prosper over the next few years.