Oracle Earnings Preview: Fiscal First Quarter 2010

Oracle [[ORCL]] is scheduled to report their fiscal first quarter 2010 results after the market closes on Wednesday, September 16th. Based on our analysis, we at EarningsPreviews.com are expecting Oracle to report inline results that meet Wall Street’s consensus expectations.

 

Analyst Expectations

We are forecasting revenues of $5.27 billion and EPS of $.30. This would represent a 3% decline in revenues from last year’s $5.42 billion in the same period. The current analyst consensus estimates calls for revenues of $5.24 billion and EPS of $.30.

 

Oracle’s fiscal first quarter has historically exhibited weak seasonal patterns. Expectations on Wall Street remain quite tempered for Oracle, despite the increasing optimism that is entering the stock markets. While the economy is showing signs of recovery, we don’t see any catalyst that would cause the company to deliver a monster quarter.

 

Comparables will become much easier for Oracle in the coming quarters, but Wall Street’s consensus estimates still remain quite conservative. This could potentially lead to some upside earnings surprises over the next few quarters. We also expect that Oracle’s acquisition of Sun Microsystems [[JAVA]] will likely be completed before the end of this year despite the latest challenges from the European Union.  

 

Stock Performance

Since the beginning of 2009, Oracle’s shares have gained over 27% and have outperformed the 9% gain in the Dow Jones Industrial average. Last year, ORCL’s stock fell only 21% and outperformed the 34% drop in the Dow Jones Industrial average.

 

Valuation

Shares are now trading at 13x consensus 2010 EPS estimates. This is a discount to the relative valuations of their peer group. While Oracle’s shares are trading near their 52-week high, the stock continues to look attractive trading at only 13x next years earnings.

 

Recommendation: Buy with a $25 price target.

 

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