Oracle Earnings Update Cloud Infrastructure and Database Software

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    Software giant Oracle reports fiscal third quarter earnings…



    Oracle excluding certain items, 83 cents per share vs. 72 cents expected by analysts, according to Thomson Reuters on revenue of $9.77 billion vs. $9.78 billion expected by analysts, according to Thomson Reuters.

    The company had a $6.9 billion one-time charge because of tax reform, with a 16.1 percent tax rate, excluding certain items, for the quarter. That’s down from 21.6 percent one year ago.

    On-premises revenue of $6.42 billion grew by 4 percent, 66 percent of Oracle’s total revenue.
    Oracle had $1.39 billion in new software license revenue, down 2 percent, 14 percent of all revenue. Analysts polled by FactSet had expected $1.42 billion in new software license revenue in the quarter
    Cloud software revenue of $1.15 billion was up 33 percent. Analysts polled by FactSet had expected $1.18 billion in revenue from cloud software in the quarter.
    Cloud platform as a service and cloud infrastructure as a service revenue came in at $415 million, 28 percent growth. Analysts polled by FactSet had expected $407 million in cloud infrastructure and platform revenue Compare to Amazon Web Services had $5.11 billion in revenue, with 45 percent revenue growth, in its most recent quarter.

    Guidance, analysts are expecting 90 cents per share on $11.22 billion in revenue in Oracle’s fiscal fourth quarter, according to Thomson Reuters.


    [b]Barclays on $ORCL
    Stock Rating Overweight
    Industry View Positive
    Price Target USD 60.00
    Price (19 Mar 2018) USD 51.95
    EPS FY1 (E) 3.09
    EPS FY2 (E) 3.36
    Market Cap (USD bn) 215.0523
    Ticker ORCL

    Nearing the End of Negative Estimate Revisions: Fair, we thought that the better macro and positive channel checks would result in better than reported Q3 results.

    SaaS and licenses were a little weaker than consensus, but the magnitude of the negative revisions are getting smaller, suggesting that we are close to finding the correct level for the underlying operational performance.

    The tax reform is driving better EPS (double-digit growth for FY18) and cash flow, and hence we argue that investors are paid to be patient given the current low valuation level (11x CY2019E EV/FCF using after-market share price). We maintain our OW rating.
    Moving Parts from BYOL and Universal Credits (UC): ORCL’s recently launched BYOL and UC programs continue to muddy the waters for revenue recognition for license and PaaS/IaaS revenues. BYOL, while driving better licenses, is fundamentally a near-term headwind to PaaS/IaaS.

    The company’s UC program provides customer flexibility around cloud consumption, but given the revenue recognition around credits, is creating some moving parts in the near term. However, we continue to believe that both these programs will be positive for Oracle’s LT tech ecosystem performance.

    Continued Operating Leverage, On Track for FY18 Double-Digit EPS Growth: The company delivered sixth consecutive quarter of y/y operating margin improvement (135bps in Q3) and discussed expectations for continued margin expansion driven by improving SaaS and PaaS/IaaS gross margins as well as continued operating expense discipline. We also note that EPS grew 20.5% this quarter driven by the
    much better than anticipated tax rate (16%) due to the tax reform. This resulted in the company reaffirming its double-digit EPS growth target for FY18.

    Value Play with Positive EPS Revisions and Optionality: It would have been great to see a clean quarter from Oracle for once. However, we are not there yet as there are still too many moving parts from the cloud transition. The lack of consistency means that investors will unlikely start chasing the name in the short term, but we continue to see the foundation of better times ahead, and at 11x CY2019 EV/FCF,
    we believe that investors are paid to be patient.

    Our PT remains unchanged at $60, but is now using a lower multiple (14x) but higher estimates from the tax reform.


    Merrill Lynch lowered its price target $57 from $62 and downgraded to Neutral From Buy

    Oracle Corp NYSE: ORCL · March 20, 1:39 PM EDT $47.17 ▼ 4.81 (9.24%)


    Oracle was maintained at Outperform with a $55 price target at Wedbush
    – no visible demand uptick but there are some reasons for optimism.
    KeyBanc downgraded Oracle to Sector Weight
    Stifel downgraded it to Hold from Buy


    Oracle Corp. $ORCL maintained as Buy with a $61 price target at Argus after Tuesday’s post-earnings 9.4% sell off to $47.05.

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