Oracle (ORCL) is scheduled to report results of its third fiscal quarter after the market close on March 14, with a conference call scheduled for 5:00 pm ET. What to watch for:
1. Q3 REVENUE CONSENSUS DOWN A TICK: Along with its last report, Oracle guided for Q3 adjusted earnings per share in constant currency of 86c-88c on revenue growth of 2%-4%. At the time, analysts were expecting the company to report Q3 EPS of 84c on revenue of $9.85B. As of today, the EPS consensus remains the same while the revenue consensus has fallen to $9.59B.
2. BUYBACK: In mid-February, Oracle disclosed in a regulatory filing that its board had authorized the repurchase of up to an additional $12B of common stock under an existing share program. A month later, however, Nomura Instinet analyst Christopher Eberle double downgraded Oracle to Reduce from Buy and cut his price target for the shares to $42 from $53, saying that Oracle's buyback program helped drive the stock to near all-time highs, but the rate of $10B in buybacks per quarter "can't last forever." The analyst said earlier this week that he believes the company is "significantly underinvesting" in research and development compared to peers at the expense of revenue and operating income growth. Further, Eberle argued that a reversion back to the historical average of about $3B per quarter in buybacks over the next two years is not enough to meet consensus estimates.
3. RBC CAPITAL SAYS Q3 ESTIMATES CONSERVATIVE: On Wednesday, RBC Capital analyst Ross MacMillan maintained his Sector Perform rating and $55 price target on Oracle with an "upside bias" to the company's "conservative" Q3 estimates and guidance, which indicate a "step-down" in its constant-currency two-year stack growth rate. MacMillan cited higher support pricing starting at the beginning of 2019 and a "likely higher buyback" than he is modeling in his positive stance on Oracle, though he also warned about the lack of "fundamental drivers" such as "cloud re-acceleration / inflection of gross profit growth" that would justify a more bullish view.
4. BUFFETT EXITS POSITION: On February 14, Warren Buffett's Berkshire Hathaway (BRK.A, BRK.B) disclosed in an SEC filing that it had exited its stake in Oracle, selling $2.13B worth of Oracle shares in the quarter, marking the firm's only exit for the quarter. Later in the month, Buffett said on CNBC that he sold his holding in Oracle due to a lack of understanding the business.