Zacks Analyst Blog Highlights: Oracle, Research In Motion, Boeing, Textron and United Technologies

Mar 25, 2011, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, March 25, 2011 /PRNewswire/ -- Analyst Blog features: Oracle, Inc. (Nasdaq: ORCL), Research In Motion (Nasdaq: RIMM), Boeing (NYSE: BA), Textron (NYSE: TXT) and United Technologies (UTX).


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Here are highlights from Thursday's Analyst Blog:

Oracle Again Beats Estimates

Oracle, Inc. (Nasdaq: ORCL) has once again beaten earnings estimates, posting 54 cents per share after the bell Thursday, which topped the Zacks Consensus Estimate of 50 cents. Revenues in the quarter totaled $8.76 billion.

This marks the fourth straight quarter in which Oracle has beaten estimates, and it has done so at roughly a 10% per positive surprise clip. New software license revenue surprised to the upside in the quarter, bringing in $2.21 billion instead of the expected $2 billion. Non-GAAP operating margin was reported at 44%.

The earnings beat comes off a recent increase in the Zacks consensus, which had been steady at 47 cents per share for most of the quarter. Ahead of the earnings announcement, ORCL stock had inched up 2.3%. Upon the earnings release the stock has dipped -- though some upward momentum seems to be offsetting this, especially since the announcement of Oracle upping its dividend yield from 5 cents to 6 cents per share sent the after-market buyers back into ORCL stock.

Analysts on the conference call will be listening closely to CEO Larry Ellison's views and guidance, however, especially in light of how much Japan's earthquake and Tsunami devastation will affect Oracle growth in the current quarter and beyond. But over the past year, Oracle has proven itself to be a steady performer. Oracle shares carry a Zacks #2 Rank (Buy), along with a longer-term Outperform recommendation.

RIMM Disappoints on Revs, Estimates

BlackBerry maker Research In Motion (Nasdaq: RIMM) beat its fiscal 4Q EPS estimates by 2 cents per share, but missed slightly on quarterly revenues and offered guidance well below the current consensus. This has sent RIMM shares down nearly 10% in after-market trading.

Research In Motion posted earnings of $1.78 per share in the quarter, topping the $1.76 estimate. But its $5.6 billion in revenues missed expectations for $5.64 billion. Far more damaging, however, was the company's reported guidance for 1st quarter earnings. It posted an expected range of $1.47-1.55 per share, below the $1.65 consensus.

Shares had been enjoying a moderate upsurge of 3.17% ahead of its earnings report after the bell Thursday, as regular trading on the Nasdaq in general was positive. And analysts had been exceedingly more upbeat about RIMM's results in the past month -- 5 upward revisions had been made in the past 30 days alone, 2 in the past week.

And profit at Research In Motion grew an impressive 32% on strong BlackBerry sales. However, the average sale price dipped to $304 per device -- down from $317 a quarter ago and $310 as of the 4th quarter 2010. Strong competition from other smartphone companies and uncertainties regarding Japan's consumption and component supply due to its earthquake and Tsunami remain major concerns.

Analysts will assess at what point RIMM stock may be oversold during the days to come. Currently, Research In Motion has a Zacks #3 Rank (Hold) and a corresponding longer-term Neutral recommendation.

New Durable Goods Orders Weak

New Orders for Durable Goods fell 0.9% in January. That was far below the consensus expectations of an increase of 1.1%. As a partial silver lining, the January numbers were revised upwards. It was first reported as an increase of 3.2%, but now they say new orders rose 3.6%. Still, the miss this month is much bigger than the upward revision to last month.

The part of the story was the extremely volatile Transportation Equipment side, and more specifically, from the Non-Defense Aircraft component, which is often the case when we get an unusually good (or bad) headline durable goods number. That is mostly orders for big 777's and 747's from Boeing (NYSE: BA), which are very expensive items. It also includes orders for business jets from firms like Textron (NYSE: TXT).

A few orders for new jumbo jets can really skew the numbers for the month. Excluding transportation equipment, new orders fell 0.6%, far below expectations for a 1.8% increase.

Overall transportation equipment orders were down 1.9%, and non-defense aircraft were up 26.7%. Last month's numbers were heavily revised for the sector. Total transportation equipment orders are now seen as having been up 29.6% in January, when it was originally reported as an decline of 7.6%. More specifically, non-defense aircraft orders rose a stunning 5564%, not the 4900% first reported. No I didn't forget to put in a decimal point. It's just a case of dividing by almost zero.

The non-defense aircraft numbers are beyond volatile. In December, aircraft orders dropped to almost nothing, falling 97.2% (revised from a 97.1% decline) and that came on the heels of a 59.6% drop in November.

If one want to gauge how much demand for long-lasting goods is coming from the private sector, then one needs to strip out orders from the Pentagon. Falling defense orders were a big part of the weakness this month. Excluding defense, orders for durable goods were up 0.4% after rising 2.8% (revised from 1.9%) in January, after falling 0.5% (revised from down 0.2%) in December.

Extremely Disappointing Numbers

This month's numbers are extremely disappointing, especially if that aircraft component is stripped out. Last month's numbers were revised sharply higher, and that is the third month in a row that has happened. The January revisions were much smaller than those of December last month.

Those December revisions were some of the largest I can recall seeing, and I have been looking at this data and writing about it as it comes out for five years now. Usually the revisions to the prior month are a few tenths of a percent, not over 2 full percentage points. The changes in the base for month-to-month changes makes interpreting the current month numbers more difficult.

One of the most significant details of this report is what is known as "core capital goods."  Those are orders for non-defense capital goods, excluding aircraft. That is a very good proxy for what businesses are investing in equipment and software. That investment is a direct input into the GDP growth calculations, and one of the real bright spots for the economy in the first half of the year.

That is the sort of spending that is a bet on the economic future of the country, and is also one of the areas that trends to swing with overall economic conditions. Those swings are a big factor in determining if the economy is growing or shrinking.

Core Capital Goods

On that front, the news so far this year is just plain ugly. Core capital goods orders fell by 1.3% after a 6.0% tumble in January (revised from a decline of 6.9%). If it is not revised away next month, it would be a sign that businesses are pulling in their horns on new investment, and that sure will not help the recovery.

While the rebound of non-defense aircraft is the biggest sector story in this report by a very wide margin, it is not the only one of note. While a total lack of orders for last month can hardly be good news not only for the big names like Boeing, and the big name suppliers like United Technologies (UTX), but eventually it is bad news for thousands of much smaller sub-contractors as well.

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