Oracle Corp. (ORCL) stock is jumping after its earnings release came in above the market's tempered estimates.
The 5% rise in the shares Tuesday morning positions Oracle to get back into the green for 2018 after a pre-earnings dip put the stock in the red year to date. The increase comes as the Redwood City, California-based company's fiscal second-quarter earnings report outpaced market expectations and it even raised guidance.
The tech leader reported quarterly earnings per share of $0.80, besting estimates by $0.02, and revenue of $9.57 billion, outpacing estimates by about $50 million. The company also modestly raised its EPS guidance into the fiscal third quarter to a range of $0.86 to $0.88, above analyst consensus.
"As we continue to scale and grow our cloud business, I expect our gross margins will ultimately go higher," CEO Safra Catz told investors on the analyst call." I continue to expect that second half revenue growth will be higher and we remain committed to delivering a higher constant currency growth rate for all of fiscal 2019 when compared to last fiscal year."
Buybacks Buoy 'Boring' Beat
While the company was confident in driving future results, the earnings release was by no means awe-inspiring. And that was just fine with many analysts.
"Sometimes boring looks good," Morgan Stanley analyst Keith Weiss wrote in his reaction to the release. "While 2% constant currency total revenue growth remains unexciting in a software market full of dynamic secular growth stories, Oracle management continues to leverage this sticky revenue base into double-digit earnings growth."
Weiss issued an "Overweight" rating for the stock and a $57 price target based on the company's continued ability to drive revenue amid its transition to cloud.
Oracle's confidence in driving future results is also fueling an aggressive buyback program that could help the company capitalize on the stock's uncharacteristically down 2018.
The company has repurchased $10 billion of stock for the second quarter in a row, helping drive Oracle over the bar for its earnings beat and into the third quarter where cloud demand is expected to remain strong.
"While buybacks remain the primary driver of EPS growth, we believe that the company continues to take a bullish long-term view on its own stock, and expect management to continue to aggressively buy back shares at these levels," Piper Jaffray analyst Alex Zukin noted.
Treacherous Market Timing
To be sure, the market's recent action does not give many reasons to be overly optimistic on the earnings day share price action, especially as Oracle lags peers.
"Oracle posted November 2018 print that was slightly better than expected but in our view not by enough to bring most investors back to the stock," Deutsche Bank analyst Karl Keirstead said. "[Revenue growth] is still well below that of large-cap peers such as Microsoft (MSFT) , SAP SE (SAP) , and VMware (VMW) ."
Keirstead retained his "Hold" rating considering the company's laggard status.
Real Money's own Jim Cramer added that current market dynamics could drive investors away as well in his column this morning.
"In this tape, it doesn't matter. The stock will go up for a day and then what?" he asked. "Goes up for a couple of days and then gets a foolish downgrade that actually crushes the stock."