Today’s new Top Pick for 2014 is $169 billion giant in the computer industry. It has recently seen a nice uptrend in its shares, and currently offers a dividend, yielding 1.3%.
Oracle (ORCL)
from Hendershot Investments
Oracle (ORCL) engineers software and hardware to work together in the cloud and data centers.
The company reported that fiscal second quarter revenues rose 2% to $9.3 billion, with EPS up 6% on lower shares outstanding. Revenue growth was driven by a 6% increase in software license updates and product support, offset by declines in hardware systems products and services revenues.
In constant currency, the hardware business grew 2%, driven by double-digit growth in Exadata, Exalogic and Exalytics, with the SPAR SuperCluster and Big Data Appliances doing even better with triple-digit growth.
The company’s cloud (Software as a Service) business delivered overall bookings growth of 35% in the quarter. The fastest growing cloud services were Fusion Human Capital Management and Fusion Salesforce Automation, each growing bookings at a triple-digit rate.
Oracle’s operating margin was 37% during the quarter and is poised for expansion due to product mix changes and leverage from investments in the sales force.
For the first time ever, Oracle generated more than $15 billion in operating cash flow over four quarters. Free cash flow increased 17% in the first half of the fiscal year to $7.2 billion, with the company ending the quarter with $37 billion in cash. Oracle returned $6.9 billion of cash to shareholders, year-to-date, through $1.1 billion in dividends and $5.8 billion in share repurchases.
Over the last 12 months, the company has paid out 90% of free cash flow to shareholders through $1.9 billion in dividends and the repurchase of 323 million shares for $10.7 billion. With a free cash flow yield of nearly 9%, Oracle appears attractively valued. Buy.
Ingrid R. Hendershot, Hendershot Investments, www.hendershotinvestments.com, 703-361-0125, December 27, 2013