Oracle Profit View Lowered After Q2 Miss

Several brokerages have lowered their profit estimates of Oracle Corp. (NASDAQ:ORCL) after the business software maker reported lower-than-expected quarterly results.

Barclays lowered its 2012 profit estimates by 7 cents to $2.35 a share, Pacific Crest cut its 2012 earnings view by 11 cents to $2.34 a share and Caris trimmed its 2012 profit forecast by a penny to $2.35 a share. Analysts expect Oracle to earn $2.35 a share for 2012.

On a GAAP basis, Oracle earned $2.19 billion or 43 cents per share, up from $1.87 billion or $0.37 per share for the year-ago quarter. Excluding items, non-GAAP net income for the second quarter was $2.78 billion or 54 cents per share, compared to $2.63 billion or 51 cents per share last year.

GAAP revenue for the second quarter rose 2 percent to $8.79 billion and non-GAAP revenue also grew 2 percent to $8.81 billion.

However, the results came in below analyst expectations. Wall Street had expected Oracle to earn 57 cents a share on revenue of $9.23 billion, according to analysts polled by Thomson Reuters.

The results were hurt by deal push-outs, weak hardware sales, and stronger than expected currency headwinds.

Although management continues to paint a bright future in its 'engineered systems' strategy, highlighted by ongoing impressive data from its Exa product lines, these results do little to increase our confidence in what we once viewed as a potentially powerful strategy for a mega-cap name like ORCL, Caris analyst Curtis Shauger has written in a note to clients.

Barclays analyst Raimo Lenschow has noted that the license weakness does increase the risk for Oracle and the peer group that a slowdown might appear earlier and be more pronounced than expected.

With the surprise miss we believe the shares will not work in the near term, given all the questions that Q2 raised. However, with the potential return of hardware momentum in the next few quarters and given the low valuation level we believe it is worth waiting, says Lenschow.

Pacific Crest analyst Brendan Barnicle, who has an Outperform rating on Oracle stock, has said: Over the next two months, we will continue to monitor the Oracle channel to see if there is any improvement. If business remains weak, then we will reassess our rating.

But, Barnicle noted that Oracle could trade as low as $22 based on 9 times estimated 2012 EPS, which is the low end of the valuation range for large-cap software.

However, with ORCL having over $3 per share in net cash, $2.42 per share in FCF and close to a 1% dividend yield, value investors may get their first chance in years to own ORCL, which remains one of the large-cap software companies best positioned for the move to the cloud, says Barnicle.

Shares of Oracle closed Wednesday's regular trading session at $25.77 on Nasdaq.