The last time Oracle (Nasdaq: ORCL) reported earnings, investors didn't take it too well. Share prices crashed to the tune of nearly 15% overnight as the database giant missed analyst targets. That's very rare: The earnings miss broke a streak of meeting or beating Street expectations that goes back to at least 2007. The miss dragged down the entire Nasdaq (INDEX: ^IXIC) index on a generally upbeat market day, because Oracle's bellwether status and rock-solid earnings history could make tech investors believe that the sky was falling.
But investors have forgiven Oracle for that miss. Share prices are back to where they were before that fateful miss. Oracle reports third-quarter results on Tuesday night. Is everything hunky-dory once again, or are investors just setting themselves up for more heartbreak?
First off, let's do a quick reality check. Oracle's surge simply mirrors the bounce in the Nasdaq Composite index over the past three months. Investors have hardly cut Oracle any more slack than they're giving to other tech stocks nowadays. Depending on your personal analysis and assumptions, that tech-sector rise could be a solid sign of recovery or a bubble just looking for a needle. I take the longer, more bullish view: Tech spending is overdue for a big rebound that never quite happened after the 2008 financial crisis.
On that note, analysts expect earnings to rise just 4% year over year to $0.56 per share on a 2.5% revenue boost to $9.0 billion. That's on the low end of Oracle's own guidance; at the high end, we might see EPS of $0.58 per share on sales of $9.3 billion.
According to Safra Catz, Oracle's CFO, several large orders that didn't make it into the disappointing second quarter simply moved back to the third. That's a reasonable explanation. However, smaller business-software rival TIBCO Software (Nasdaq: TIBX) claims to be stealing Oracle's customers by the boatload. So does IBM (NYSE: IBM), particularly on the server hardware side.
In that light, I'm not sure that Oracle will see as many simple deadline slides as management thought. Some of those missing contracts will still show up on milk cartons when Oracle spills the beans.
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