Oracle (ORCL) To Post Q1 Results: Can It Beat On Earnings?

Oracle Corporation (NYSE:ORCL) is set to report first-quarter fiscal 2018 earnings on Sep 14.

Notably, the company has beaten the Zacks Consensus Estimate in two of the trailing four quarters. Last quarter, the company delivered a positive earnings surprise of 14.10%.

Adjusted earnings of 89 cents per share and revenues of $10.94 billion comfortably beat the Zacks Consensus Estimate of 78 cents and $10.48 billion, respectively. Revenue growth of 3.3% (4% in constant currency) was also better than management’s guidance of 1% to 2%. Oracle’s top-line growth benefited from the ongoing cloud-based momentum.

Total revenue for first-quarter fiscal 2018 is anticipated to grow in the range of 4-6%. Earnings are anticipated to be between 59 cents and 61 cents for the quarter, with an impact of couple of cents from adverse currency headwind.

Oracle’s stock has gained 34.2% year to date, substantially outperforming the 25.3% rally of the industry it belongs to.

Let’s see how things are shaping up for this announcement.

Factors to Consider

Oracle is benefiting from significant momentum in its Software-as-a-Service (SaaS) and Platform-as-a-Service (PaaS) offerings. This has also helped in improving the company's competitive position against salesforce.com (NYSE:CRM) and Workday.

We believe that the company’s growing cloud market share will continue to drive top-line growth. This is further evident from the expanding customer base.

During the last quarter, Oracle’s cloud offerings attracted organizations like Advanced Drainage Systems, ARRIS, Australian Finance Group, Benchmark, Detroit Water and Sewerage, Immofinanz AG, Malmo stad, Marz Systems, Mebrom, Nuvias Group, Pernod Ricard (PA:PERP) Asia, Telesoft and Total.

Moreover, Oracle Analytics Cloud has also gained significant traction. The updated product offers new features such as user-driven scenario modeling, next-generation mobile and social analytics and complete customer control. Oracle recently stated that 75% of Oracle Analytics Cloud customers are new to the platform that reflects strong adoption rate.

However, higher investments on IaaS will affect gross margin expansion in the near term. Further, a strong U.S. dollar remains a headwind.

Earnings Whispers

Our proven model does not conclusively show that Oracle is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Oracle currently has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 61 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Oracle has a Zacks Rank #3 that increases the predictive power of ESP. However, the company’s ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

The following stocks can be considered at the moment, as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases:

Applied Optoelectronics Inc. (NASDAQ:AAOI) has an Earnings ESP of +6.76% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

ManTech International Corporation (NASDAQ:MANT) has an Earnings ESP of +1.96% and carries a Zacks Rank #2.

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