Surprised Reactions To Oracle's Q4 Beat

Oracle Corporation ORCL announced its second-quarter earnings on Wednesday after the close. The company reported an adjusted EPS beat of $0.89 versus $0.78 and revenues of $10.89 billion compared to the $10.45 billion estimate.

Oracle shares were up over 11 percent to $51.54 at Thursday’s open before pulling back to around $50.75.

Here’s a summary of some of Wall Street’s reactions to the report.

BMO: Strong Growth With More To Come

BMO Capital Markets analyst Keith Bachman reiterated an Outperform rating with a price target raised from $48 to $57.

Bachman highlighted strong operating margin expansion of 80 basis points year over year and 5.2 percent operating income growth year over year, but noted that the company’s increased software sales are likely unsustainable.

Cash flows were also a point of interest, being stronger at this time than in the last two years, and expects both cash from operations and free cash flow growth to accelerate.

BoA Merrill Lynch: On The Cusp Of A Cloud Megacycle

Bank Of America Merrill Lynch analyst Kash Rangan reiterated a Buy rating with a price target raised from $54 to $62.

Rangan focused on Oracle’s decision to re-segment its businesses. The company had been subject to a “plethora” of cloud and legacy business metrics that brought along the risk of not being able to please investors.

That and additional changes could drive a $15 billion software as a service revenue stream.

Deutsche Bank: Beat Source Was Unexpected

Deutsche Bank analyst Karl Keirstead reiterated a Hold rating with a price target raised from $44 to $48.

Oracle’s cloud business is the base of Keirstead’s bull case, and although it fell roughly in line with guidance of 48–52 percent growth, it fell short of the analyst’s 57 percent estimate. The company’s earnings beat came instead from strong on-premise database sales driven by customers moving forward with renewals.

Keirstead noted that, while not especially expensive, Oracle shares are still more costly than Microsoft Corporation MSFT shares.

UBS: EPS Growth Taking Center Stage

UBS analyst Fatima Boolani reiterated a Buy rating with a price target raised from $48 to $52.

After considering the company’s 10-percent after-hours rise in share price, the durability of Oracle’s margin expansion and management’s bullish stance, Boolani sees double-digit EPS growth in fiscal 2018 outshining license beat other analysts have focused on.

“We think these results are likely to raise investor conviction,” said Boolani.

At time of publication, shares of Oracle were up 8.98 percent at $50.49.

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