Earnings to Watch Next Week: Oracle, H&R Block, Lennar and Adobe in Focus
Tuesday (June 15)
IN THE SPOTLIGHT: ORACLE
ORACLE: The world’s largest database management company is expected to report its fiscal fourth-quarter earnings of $1.31 per share, which represents year-over-year growth of over 9% from $1.20 per share seen in same period a year ago.
The Austin, Texas-based computer technology corporation would post revenue growth of more than 6% to $11.07 billion. In the last four quarters, on average, Oracle has beaten earnings estimates about 6%.
“Oracle’s current low valuation at ~14x CY22e EPS reflects its slower growth rate compared to peers. Despite potential opportunities within existing database customers and cloud-based ERP applications, offsets from waning businesses mean 2021 likely lacks the catalysts for the positive inflection in revenue growth investors would need to see to drive multiples higher,” noted Keith Weiss, equity analyst at Morgan Stanley.
“We see 16% EPS growth in FY21 and 6% in FY22, driven by an aggressive pace of share buybacks. However, cc revenue growth is ~2%, in a software sector filled with strong secular growth stories, and just 2% operating income growth points to Oracle potentially reaching peak margins, leaving us Equal-weight at our $73 PT.”
H&R Block: The largest tax provider in the U.S. in terms of offices and revenues is expected to report its fiscal fourth-quarter earnings of $5.07 per share, which represents year-over-year growth of over 68% from $3.01 per share seen in the same period a year ago.
The tax preparation company operating in Canada, the United States, and Australia would post revenue growth of over 32% to around $2.4 billion.
“HRB’s core business of assisted tax prep has seen declining volumes over the last 8 years, which we expect to continue this year. We expect the assisted business to remain under pressure given the industry shift toward DIY offerings, with a modest offset from HRB’s own growing DIY business,” noted Jeffrey Goldstein, equity analyst at Morgan Stanley.
“Recent acquisition Wave Financial could be a driver of long-term upside but limited synergies and competitive market makes it hard to prove ROI. HRB generates a high degree of FCF with share buybacks driving double-digit-digit EPS growth in the out years of our model. The stock trades at an attractive normalized FCF yield which suggests the stock could re-rate significantly by improving volumes.”
Wednesday (June 16)
IN THE SPOTLIGHT: LENNAR
The Miami-based home construction company is expected to report its first-quarter earnings of $2.37 per share, which represents year-over-year growth of over 40% from $1.65 per share seen in same period a year ago.
The United States’ leading homebuilders would post revenue growth of about 17% to $6.16 billion.
Thursday (June 17)
IN THE SPOTLIGHT: ADOBE
The U.S. multinational computer software company is expected to report its fiscal second-quarter earnings of $2.81 per share, which represents year-over-year growth of about 15% from $2.45 per share seen in same period a year ago.
The San Jose, California-based software company would post year-over-year revenue growth of over 19% to $3.73 billion.
“Adobe has leading market share in some of the most dynamic secular growth areas in software: creative design, dynamic media, and marketing automation. As such, we see the longer-term growth story for ADBE as better than most,” noted Keith Weiss, equity analyst at Morgan Stanley.
“With a large recurring rev base and operating margin improvements expected (as margin pressure from recent acquisitions comes to an end), we expect 20%+ EBIT CAGR from FY20-FY22 and believe this durable growth is not fully reflected in shares. Our $575 PT is based on 41x CY22e EPS of $13.96, which implies ~2.3x PEG on 16% EPS CAGR from FY20-FY22e.”
Friday (June 18)
There are no major earnings scheduled