Oracle's Clean Q4 Beat The Latest Entry In A Solid Season For Large-Cap Software Sector

After a strong fourth-quarter earnings report, Deutsche Bank Research analyst Karl Keirstead maintains his Hold rating on Oracle Corporation ORCL and raised his price target from $44 to $48.

Notable Earnings Metrics

• Total Revenue Growth: 3 percent.
• Revenue: $10.9 billion versus $10.5 billion consensus.
• EPS: $0.89 versus $0.78 consensus.
• Guidance: Oracle set its Q1 total revenue growth at 4–6 percent (above Deutsche Bank’s 4 percent estimate), reaffirmed EPS growth.

Additional metrics from the report are available on Benzinga Pro.

What Is Driving The Growth?

While Oracle’s cloud business performed well, “the beat came via total on-premise revs of $7.5 billion, down only 1 percent y/y and a full $450 million ($315 million from license revs) above Oracle’s guide. With total database revs +8 percent (guidance was for a decline), the upside clearly came from on-premise database sales,” Keirstead noted.

Analyzing The Entire Sector

Keirstead highlighted how every large-cap software company had been posting strong metrics lately, specifically citing Red Hat Inc RHT, Adobe Systems Incorporated ADBE, Microsoft Corporation MSFT, among others.

“Overall enterprise software spend does seem strong and more F500 companies are embracing “digital transformations”, largely via software/cloud technology. This will lend further valuation support to the Software sector and raise expectations for a strong 2Q17 earnings season,” he stated.

However, Keirstead did note this demand could be temporary, and investors need to be cautious. Oracle was trading up nearly 12 percent at $51.86 during Thursday’s trading session.