Will Oracle Deliver After the Closing Bell?

On Monday, technology stocks rallied as the Dow (NYSEARCA:DIA) jumped more than 200 points.  Shares of Hewlett-Packard (NYSE:HPQ) and Apple Inc. (NASDAQ:AAPL) increased more than 2 percent in morning trading.  However, many investors have their eyes on the earnings release of Oracle Corp. (NASDAQ:ORCL).

After Tuesday’s closing bell, Oracle is expected to post a double-digit percentage increase in its fiscal second quarter earnings, but some analysts fear the global slowdown will impact results.  The company reported slightly better-than-expected first quarter 2012 results.  Since then, the global debt crisis has kicked into full gear and Europe is still far from a crisis resolution.  Nomura analyst Rick Sherlund explained, “The last quarter was unambiguously positive.  Big deals did still seem to close in the November quarter; however, we expect a tougher IT spending environment next year, notably in Europe and in certain verticals such as financial services and the public sector.”

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The financial sector (NYSEARCA:XLF) has been under stress since the credit bubble pop.  More recently, banks such as Citigroup (NYSE:C) have announced more layoffs.  Royal Bank of Scotland (NYSE:RBS) is currently considering shutting down more than half of its Global Banking and Markets division.  In order to expand growth and offer customers a wider range of services, Oracle entered into an agreement to acquire RightNow Technologies, Inc. (NASDAQ:RNOW) in October.  RightNow Technologies is a leading provider of cloud-based customer service.  It helps organizations deliver quality customer experiences across call centers, the web and social networks.

The deal could help Oracle compete with other software companies such as Salesfore.com (NYSE:CRM) and Microsoft (NASDAQ:MSFT).  Last week, Cowen analyst Peter Goldmacher explained that Oracle’s goal “isn’t to be the largest provider of on-demand customer service software; it’s to give clients good enough technology to keep Salesforce.com out of its installed base.”

With Oracle’s stock up 1.5 percent in trading today, many investors are wondering if the earnings release will be good enough to keep shares elevated.  Oracle is expected to report non-GAAP earnings between 56 cents and 58 cents per share.  Last year, the company reported earnings of 51 cents per share, which beat analysts’ estimates by 5 cents.  The company has beaten estimates the last four quarters.  Yet, shares of Oracle have declined 7 percent year-to-date, while other tech competitors such as International Business Machines (NYSE:IBM) and SAP AG (NYSE:AG) have increased 26 percent and 9 percent, respectively.  With many expecting a solid quarter from Oracle, the stakes are high to deliver.  Only one out of 17 analysts covering the company has reduced estimates in the past month.  Furthermore, 31 analysts rate the stock as a buy, none rating it as a sell and six rating it as a hold.