Oracle's Going Down: How to Trade Earnings

Tickers in this article: AAPL HPQ IBM MSFT ORCL RHT
NEW YORK ( TheStreet) -- All eyes will be on Oracle's (ORCL) third-quarter results after the close on Wednesday, March 20. Its results may be market-moving. The company has a history of beating estimates, which now range from 65 cents to 70 cents a share.

Simply beating the average estimate of 66 cents per share will not be enough to propel the shares higher, but a beat of at least 4 cents will surely move the needle.

We don't predict the future, we predict the odds. Chances are, within days after a beat, Oracle's shares will tank. An upward path throughout 2013 should eventually follow. In the interim, there is money to be made.

I believe Oracle will report near the high end of the range or slightly beat. More importantly, Oracle appears well positioned to offer surprisingly high guidance. Granted, it's been a long time since we have had a mindset of economic growth, but history has clearly demonstrated that economic growth cycles always follow periods of contraction.

One of the world's leading suppliers of software for information management, Oracle trades an average of 19 million shares per day with a market cap of $171 billion. Since September 2012, Oracle's value has grown an impressive $13 billion.

Let's look under the hood of Oracle and see if you will agree that the numbers support Oracle as an attractive investment.

Nothing paints a picture quite the same as per-share data. It's easy to get your head wrapped around a company's performance as it relates to each of your shares.

ORCL EPS Diluted Quarterly YoY Growth ChartORCL EPS Diluted Quarterly YoY Growth data by YCharts

Oracle is best in class for EPS growth. HP (HPQ) basically fell off the map, but may turn the ship around. Can HP climb back to the glory days of $40 per share or more? Don't count on it this year, although 2013 appears bullish, even for HP.

What many may find striking is Oracle's move above Apple's (AAPL) EPS growth rate. I included the metric to illustrate how much pricing power Oracle has. When it comes to database vendor investments, Oracle is best in class. There is little reason to expect its current status to change anytime soon.

Next, free cash flow comparisons allow investors to see what a dollar investment can expect to yield in overall profitability. Free cash flow return for Oracle, Red Hat (RHT) , IBM (IBM) , and Microsoft (MSFT) illustrate how well Oracle has navigated the space. It moves with a steady and stable hand. The market hates uncertainty; one look at Apple's stock chart shows how uncertainty is punished.

ORCL Free Cash ROA TTM ChartORCL Free Cash ROA TTM data by YCharts
Oracle doesn't pay a large dividend like many of its peers. That's likely the result of Oracle's stock remaining resilient while others haven't.

ORCL Dividend Yield ChartORCL Dividend Yield data by YCharts