Conservative · Stocks to Consider and Updates

Oracle Posts Strong Profits; Ups Outlook

Shares of Oracle Corp. (NYSE: ORCL – $57.21) are trading at an all-time high on surprisingly strong results for the enterprise software company’s fiscal fourth quarter. For the period the company reported revenue of $11.14 billion, up 1% year over year, or 4% in constant currency, ahead of the Wall Street consensus of $10.95 billion, and better than the company’s guidance of flat to down 2%, or 1% to 3% growth in constant currency. Cloud services revenue was about flat year-over-year at $6.8 billion, while cloud and on-premise license revenue was up 12%.  Hardware revenue was down 11%, while services revenue fell 7%.  Adjusted profits of $1.16 a share were well ahead of the Street at $1.07 and exceeding the company’s previous guidance of $1.05 to $1.09 a share. For the full fiscal year, Oracle posted revenue of $39.5 billion, fractionally higher than a year ago, or up 3% in constant currency. Adjusted per share earnings was $3.52, up 16% year-over-year.

       During a conference call with investors following the report, Oracle said it’s projecting first-quarter revenues up 0% to 2% in the fiscal first quarter ending in August, or 1% to 3% growth on a constant currency basis, with adjusted per share earnings of $0.80 to $0.82.  Wall Street consensus has been for about 2% growth, with profits of $0.80 cents a share. For the fiscal 2020 full year, management sees revenue growth accelerating from this year, which is consistent with the Street forecast for 2.3% growth. The company sees adjusted profits growing double-digits, which implies a beat on the current Street estimate of $3.86 a share.

       The database transition to the cloud is a long-term game. Oracle should continue to have a large degree of success here, given its longstanding customer relationships and the operating cost/performance its systems offer. Meanwhile, revenue, net income and cash flow are likely to advance moderately over time as the transition to the cloud progresses, with per share figures benefiting from stock purchases. At their recent price, ORCL shares -up nearly 9% on the earnings and guidance news – offer conservative, patient investors a respectable risk-adjusted total return given its growing dividend currently yielding 1.9%.

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