Oracle Corporation (NASDAQ:ORCL) posted revenue of $11 billion in the fourth quarter of 2013, which is below the estimates of $11.1 billion. The EPS came in at $0.87 and was in line with Street expectations and estimates from Deutsche Bank.
For the financial year 2014, the report sees positive signals as the company takes decisions in favor of Oracle Corporation (NASDAQ:ORCL)’s shareholders. Deutsche Bank has reiterated Hold rating and $32 price target, from $35 for Oracle Corporation (NASDAQ:ORCL).
Oracle’s Revised Estimates by Deutsche Bank
Deutsche Bank has revised its estimates for the first quarter of 2014 following the Wall Street consensus for Oracle Corporation (NASDAQ:ORCL). The performance of Oracle Corporation (NASDAQ:ORCL)’s HW was better than expected in the fourth Quarter. There was some decline in SW due to budget issues and APAC macro. The organic license and total growth in the fourth quarter of 2013 is expected to be -1 percent y/y, says a report from Deutsche Bank.
Deutsche Bank reduced Oracle Corporation (NASDAQ:ORCL)’s first quarter revenue estimate but has not changed the revenue estimate for the financial year 2014. The revenue estimates also include ~$120m from Acme Packet and Tekelec for 1Q14 and ~$460m for all of FY14, which has a ~250bps headwind to 1Q14 growth and ~200bps for all of FY14. The operating expense estimates have been set high as the company is investing in distribution, due to which operating margin declined but was counterbalanced by the increased estimates of gross margin in the Hardware segment.
Oracle Corporation (ORCL)’s Hardware Segment Impressive
The Hardware segment generated more revenue than estimated, but there was a decline in the performance of the Software segment due to budget deficiency and certain geographical issues. The Hardware segment performed better than the low investors’ expectations. The company said that Engineered Systems was more than a third of the Hardware business. According to the report, Oracle primarily sold quarter and eighth rack configurations.
The good performance of the Hardware segment was pulled down by the weak performance of the Software segment. Deals in the Software segment were postponed or reduced from their actual size due to budget issues that buyers had. The most affected geographies were Asia Pacific and Brazil.
Buyback and Dividend Support Share Price
Deutsche Bank expects an increase in earnings per share as Oracle Corporation (NASDAQ:ORCL) is taking many shareholder friendly moves. The growth in EPS will support the stock price. At present, there are around $14 billion shares left for buyback, according to Deutsche report.
With some improvement in the Hardware segment, the gross margin profile is estimated to increase at a gradual rate compared to recent results and add to margins. According to reports, the stock will return through share buybacks and doubled dividends.
