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: Oracle stock falls despite earnings beat

Oracle Corp. blew away expectations for earnings and sales to close out its fiscal year Tuesday, but shares still dipped as investors awaited the company’s forecast to see if revenue growth is expected to continue at a similar pace.

Oracle
ORCL,
-1.19%

on Tuesday reported fiscal fourth-quarter earnings of $4.03 billion, or $1.37 a share, on sales of $11.23 billion, up from $10.44 billion a year ago. After adjusting for stock-based compensation and other effects, Oracle reported earnings of $1.54 a share, up from $1.20 a share last year.

Analysts on average expected adjusted earnings of $1.31 a share on revenue of $11.02 billion. Shares fell more than 1% in after-hours trading immediately following the release of the results.

Oracle stock has been soaring of late, gaining 31.9% in the past six months, with the S&P 500
SPX,
-0.20%

increasing 15.2% in that time. Shares closed at an all-time high of $84.61 on June 8, and finished Tuesday’s session at $81.60.

One reason for the gains has been Oracle’s strongest sales growth in years. For the full fiscal year, Oracle totaled $40.48 billion in sales, up 3.6% from its previous fiscal year. Oracle revenue had declined 1.1% and 0.8% in the past two years, respectively, and sales have declined four times in the past six years overall. The growth rate for the 2021 fiscal year is the second-best for Oracle since the end of the 2012 fiscal year.

Earnings also increased for the full year, though much of the gains in earnings-per-share are a result of massive share repurchases. Oracle repurchased $20.9 billion in stock as the COVID-19 pandemic raged in the past 12 months, and has now spent more than $76 billion in the past three fiscal years purchasing its own stock.

JPMorgan analysts now question how much Oracle shares can continue to appreciate, as “a good chunk of the value-rotation uplift has now played out.”

“Our checks do support the potential for Oracle to displace some very large competitor ERP footprints, and the $5 EPS threshold is drawing nearer as a favorable milestone, but with much less dry powder for exercising share buybacks, growing earnings will become a different challenge in the future because it must be driven relatively more by core operations,” the analysts, who have an overweight rating and $73 price target on the stock, wrote in a note this week.

Oracle did not provide a forecast for the new fiscal year in Tuesday’s release, but executives typically provide outlook on the related conference call. That call is scheduled for 5 p.m. Eastern time.

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