Oracle Stock Trips Over Second-Quarter Results



Oracle Corp. (NASDAQ:ORCL) closed the regular trading session on Wednesday up 2.88 percent at $34.60 per share but fell as much as 1.4 percent in post-market trading after releasing second-quarter financial results. Total revenues at Oracle increased 2 percent on the year to $9.3 billion, above the mean analyst estimate of $9.19 billion. Adjusted earnings increased 7 percent on the year to 69 cents per share, above the mean analyst estimate of 67 cents per share. Unadjusted, GAAP earnings increased 5 percent on the year to 56 cents per share.

Total revenue growth was driven by the  software license updates and product support segment, where revenue grew 6 percent to $4.5 billion. Hardware systems revenues, including support, were effectively flat at $1.3 billion. Hardware systems products revenue alone fell 3 percent to $714 million.

Operating income fell 2 percent on the year to $3.4 billion on GAAP operating margin of 37 percent. Non-GAAP operating income fell 1 percent to $4.2 billion on a margin of 46 percent. One highlight from the report is that trailing twelve months free cash flow increased 14 percent to $14.6 billion, or 132 percent of net income.

The news was good but is somewhat underwhelming compared to the firm’s first-quarter results. Oracle demonstrated that it can grow both revenue and earnings despite ongoing economic headwinds and, gauging by the proximity of analyst estimates to actual results, the market seems to have a firm grasp of how the company is operating.

Oracle has generally been beat up on the stock market this year. Shares are off about 3 percent year to date, having gone over a couple of cliffs, including one in December. The slide has shares down about 3.7 percent over the past month, and the firm’s earnings report has already erased some of the post-taper-announcement gains.

Oracle CEO Larry Ellison is not to be deterred, though. Ellison used the second-quarter earnings release as an opportunity to tout Oracle’s rapidly growing software-as-a-service segment, saying that, “Our billion dollar SaaS business delivered overall bookings growth of 35 percent in the quarter. Our fastest growing cloud services were Fusion Human Capital Management and Fusion Salesforce Automation, each growing bookings at a triple-digit rate.”

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