Oracle Shares Rise On Better-Than-Expected Results

Oracle Corp. (ORCL) shares jumped Wednesday morning after the software giant beat Wall Street's estimates for its fourth fiscal quarter and issued a better-than-expected forecast for the current period.

In early trading Wednesday, Oracle shares were up 8.2% to $21.50 - setting the stock's highest level in nearly 10 months.

Late Tuesday, the maker of enterprise software reported a 7% decline in earnings for the quarter ended May 31. Total revenue fell 5% to $6.9 billion while sales of new software licenses fell 13% to $2.7 billion. Those results still came in ahead of estimates from analysts.

For the current period, Oracle projected earnings to come in between 31 and 33 cents a share. Analysts have been anticipating first-quarter earnings excluding special items of 30 cents a share, according to Thomson Reuters.

"The quarter was very clean with little to pick on, and in our view, provided a good example of the power of the traditional software perpetual license model plus maintenance, when coupled with consistent execution," John DiFucci of J.P. Morgan wrote in a note to clients Wednesday.

Oracle remains popular on Wall Street, with more than two-thirds of the analysts covering the stock maintaining a buy rating.

The company's shares have gained about 20% since the first of the year, compared to a 14% rise for the Nasdaq. The stock remains below the $24 median price target set by analysts.

"We continue to favor Oracle as a relative outperformer during this downturn because of its large base of recurring maintenance revenues; business diversity (product set, end markets, and geographies); and earnings and cash flow stability," David Hilal of Friedman Billings Ramsey wrote in a report.

Some remain cautious, however, given the state of the economy as well as the company's pending acquisition of Sun Microsystems (JAVA).

"We continue to believe that Oracle's standalone margin profile is unsustainable, and the pending acquisition/integration of Sun is going to be more challenging than the current valuation implies," wrote Peter Goldmacher of Cowen & Co., who rates the stock as neutral. "We believe ongoing consolidation, particularly among the top four enterprise IT providers (Oracle, IBM, Cisco, and Hewlett-Packard) is going to fracture previous go-to-market partnerships, disrupt indirect sales channels and lead to pricing wars."