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Can Q2 earnings propel Oracle Corporation (NYSE:ORCL) stock to new highs?
Shares of Larry Ellison co-founded Oracle Corporation (NYSE:ORCL) have failed to bounce back since the company's first-quarter earnings in September and are down by more than 5% since then. Oracle stock could not continue the momentum gained in the first 9 months of the year which propelled the stock to new highs. The Redwood City, California-based company is scheduled to report its fiscal 2018 second-quarter earnings today after the closing bell. ORCL stock is having its best run in recent years, gaining more than 30% in the year-to-date. Though the sentiment ahead of earnings is little somber, given the below par guidance for Q2 which resulted in Oracle stock seeing a major correction after Q1 earnings and losing momentum from the record highs. The question now is, can Q2 earnings propel Oracle stock to new highs?
Coming to Wall Street estimates, the average analyst estimates for the database giant's second quarter are a non-GAAP EPS of 68 cents per share on revenue of $9.57 billion. These numbers imply an 11.5% YoY EPS growth, and a slender 5.5% YoY revenue growth. The Q2 outlook had disappointed investors big time as it came below the Street estimates. The management guided revenue to be in the range of $9.25-$9.4 billion while the EPS estimate was in between $0.64 and $0.68 per share. Oracle has mixed record when it comes to earnings history having beaten EPS estimates in 5 out of the last 8 quarters. While on the revenue front the record is not that great, beating the estimates only 3 times in the last 8 quarters but over the last two-quarters, Oracle has come to life driven by the cloud segment even beating the high end of the revenue estimates.
The earnings whisper number of 69 cents per share also suggests a narrow beat is on the cards. However, ORCL stock needs more than an earnings beat to rise to new highs. The Q3 outlook needs to be stronger to boost investor sentiment and to show that it deserves a premium valuation, as the Oracle stock presently trades 22 times earnings which is very close to its 5 year high of 24. The technical set up also looks better with the stock trading above all its key moving averages and also, ORCL stock saw a bullish Moving Average Convergence Divergence (MACD) crossover, the day before yesterday suggesting some momentum gain ahead of earnings. However, things could change quickly going by the stock history, if the tech giant disappoints.
Is Adobe Systems Incorporated (NASDAQ:ADBE) stock all set for a post-earnings rally?
The second major earnings for the day is of San Jose, California-based Adobe Systems Incorporated (NASDAQ:ADBE), also scheduled to report after the market close. Adobe stock is on an amazing bull run in 2017, up more than 72%in the year-to-date. However, the recent rotation from the technology sector had hit ADBE stock as well which led to a 10% correction from its all-time highs. Adobe shares have rebounded since then but yet to make a complete recovery. Now, investors have high expectations from the fiscal fourth-quarter earnings to propel the stock to complete recovery and continue the momentum to new record highs. The investor sentiment around Adobe stock in 2018 is also very bullish after the Shantanu Narayen led company announced its full-year 2018 outlook in October, an EPS of $5.50 on revenue of $8.70 billion while analysts were modeling an EPS of $5.21 a share and revenue of $8.68 billion. The question now is, can Adobe Systems sustain the strong revenue and profit growth?
The Wall Street consensus expects the company to report a non-GAAP EPS of $1.16 a share and a revenue of $1.95 billion. The analyst estimates imply a healthy 21.4% YoY top-line growth and a much better 28.8% YoY rise in earnings as the company posted an EPS of 90 cents per share in the year-ago same quarter. When it comes to earnings history, Adobe stock has a stellar record delivering a beat on both revenue and earnings estimates in the last 8 quarters, even beating the high-end estimates in the last four quarters. The earnings whisper number of $1.19 per share just reaffirms Adobe stock's strong earnings record. Adobe stock could still have significant upside left from here as it just trades 32 time its forward earnings which is well below its historical PE ratio (past 5 years) of 69.56. Adobe stock still remains a good buy ahead of earnings with Wall Street also being extremely optimistic about its prospects. According to Yahoo Finance, 23 out 28 analysts have a buy or strong buy rating with just 4 having a hold and only 1 with a sell rating. Coming to technical setup, ADBE stock faces its next resistance at its 20-day SMA and could soon see a bullish Moving Average Convergence Divergence (MACD) crossover.
Can Q1 2018 earnings help Costco Wholesale Corporation (NASDAQ:COST) stock breach the $200 mark?
The third and final major earnings for the day is of retail giant Costco Wholesale Corporation (NASDAQ:COST). The Issaquah, Washington based membership-only warehouse club operator will also report earnings after the bell. Shares of the brick and mortar retail company have done well over the last three months to rise by nearly 16%. Costco shares tanked in October even after reporting strong fiscal Q4 earnings due to valuation concerns. Now, with COST stock trading at 31 times earnings, very close to 5 year high earnings multiple of 33. The valuation concerns may come back to haunt Costco stock. Can the latest quarter earnings help COST stock to breach the $200 mark?
First, we shall have a look at the Street estimates. The average analyst EPS estimate for Costco in Q1 2018 is $1.34 per share, 17 cents higher than last year same quarter EPS number, up 14.52% YoY. The retail store chain is expected to deliver a revenue of $31.49 billion which translates to a YoY growth of 12.1%. When it comes to earnings history, Costco's track record isn't that great, beating earnings estimates 5 times in the last 8 quarters but only two times when it comes to revenue estimates. However, the last two quarters have been really strong quarters for Costco. The earnings whisper number of $1.34 a share hints at just meeting the estimates. Comp sales and membership fees are key for the retail giant in the first quarter earnings. Analysts are suggesting that membership renewals metric could be the one metric which could decide which way the stock is headed after earnings. Costco has also done well to fend off the threat from Amazon (NASDAQ:AMZN), after its entry into groceries with the Whole foods acquistion. However, despite all the positives, investors need to be little cautious ahead of earnings as the COST stock is in overbought territory as per Relative Strength Index (RSI) indicator but another popular momentum indicator Bollinger bands doesn't yet suggest that Costco shares are overbought. Though that may also soon change with a slight uptick, hence investors need to exercise little caution as the upside from here could be limited.
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