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Apple, Facebook, Google, Microsoft, Intel are part of Zacks Earnings Preview
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For Immediate Release
Chicago, IL – November 6, 2017 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Apple(AAPL - Free Report) , Facebook , Google (GOOGL - Free Report) , Microsoft (MSFT - Free Report) and Intel (INTC - Free Report) .
The blowout Apple report became the latest earnings release that built on the momentum we have been seeing from a diverse cross-section of companies this earnings season. The trend is particularly notable in the Technology sector, where not only the likes of Facebook and Google are shining, but even stodgier operators like Microsoft and Intel appear to have recaptured their mojo.
The law of large numbers doesn’t appear to have the same meaning for these Tech companies as it does for leaders in other sectors. After all, Apple’s +18.9% higher earnings in Q3 on +12.2% higher revenues are on a base of more than $9 billion in earnings and $46.9 billion in revenues in the year-earlier quarter. Importantly, Apple showed again that while iPhone may account for a bigger chunk of its business, it is by no means that only driver, as the +24% jump in the high-margin services revenue to $7.9 billion shows.
All in all, it has been an impressive earnings performance from the Technology sector, which should help ease concerns about the sector’s strong performance lately (the Zacks Tech sector is up +25.9% year-to-date vs. +15.3% gain for the S&P 500 and +6.2% gain for the Russell 2000).
For the Tech sector, we now have Q3 results from 85% of the sector’s market cap in the S&P 500 index. Total earnings for these Tech companies are up +22.4% from the same period last year on +9.3% higher revenues, with 81.8% beating EPS estimates and 86.4% beating revenue estimates.
As high as the proportion of Tech companies beating estimates is, the beats percentages are actually in-line with other recent quarters. But growth is notably accelerating.
Q3 Earnings Season Scorecard (as of Friday, November 3, 2017)
We now have Q3 results from 406 S&P 500 members that combined account for 85.4% of the index’s total market capitalization. Total earnings for these companies are up +7.5% from the same period last year on +6.3% higher revenues, with 73.9% beating EPS estimates and 66.7% beating revenue estimates.
Looking at Q3 as a whole, combining the actual results from the 406 S&P 500 members that have come out with estimates for the still-to-come 94 index members, total earnings are expected to be up +6.5% from the same period last year on +5.6% higher revenues. Excluding the weak results from the Finance sector, total earnings for the rest of the index would be up +9.6% on +6.1% revenue growth.
Four Takeaways From the Q3 Earnings Season
First, there is clear momentum on the revenue front, with growth notably accelerating from other recent periods. Total revenues for the 406 S&P 500 members that have reported results, as of Friday, November 3rd, are up +7.5% from the same period last year, which compares to +6.3% top-line growth for the same group of companies in the preceding quarter and still lower average growth rates in the prior periods.
Second, the above-average proportion of positive surprises that we saw in the preceding period has continued this earnings season as well. We typically don’t give positive surprises a lot of weight in evaluating or assessing an earnings season since we all know that management teams are experts in managing expectations. Even then, the trend emerging in the Q3 earnings season is noteworthy for two reasons. First, estimates for the quarter had not fallen by as much as had historically been the case. Second, the proportion of positive revenue surprises, a much harder variable to manipulate relative to earnings, is only a shade below the preceding quarter’s record level.
Third, the revisions trend for the December quarter is shaping up to be unusually favorable. The pattern over the last few years has been that as the quarterly earnings reporting season gets underway, estimates for the following quarter would start coming down. This trend improved a bit over the last few quarters when estimates would not fall by as much as was historically the case, but they were nevertheless coming down.
The unusual thing about the Q4 estimates is that they actually went up at first and have started coming down only over the last couple of days, which has brought Q4 growth expectations to where they stood at the start of the period. This is totally different from what we would typically see in the comparable periods of other earnings seasons over the last few years. This will most likely change as more companies report Q3 results and manage the market’s expectations for the December quarter, but it is nevertheless an unusually positive development.
About the Zacks Rank
Since 1988, the Zacks Rank has proven that "Earnings estimate revisions are the most powerful force impacting stock prices." Since inception in 1988, #1 Rank stocks have generated an average annual return of +28%. During the 2000-2002 bear market, Zacks #1 Rank stocks gained +43.8%, while the S&P 500 tumbled -37.6%. Also note that the Zacks Rank system has just as many Strong Sell recommendations (Rank #5) as Strong Buy recommendations (Rank #1). Since 1988, Zacks Rank #5 stocks have significantly underperformed the S&P 500 (+3% versus +10%). Thus, the Zacks Rank system allows investors to truly manage portfolio trading effectively.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has more than doubled the market from 1988 through 2016. Its average gain has been a stellar +25% per year. See these high-potential stocks free >>.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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Apple, Facebook, Google, Microsoft, Intel are part of Zacks Earnings Preview
For Immediate Release
Chicago, IL – November 6, 2017 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Apple(AAPL - Free Report) , Facebook , Google (GOOGL - Free Report) , Microsoft (MSFT - Free Report) and Intel (INTC - Free Report) .
To see more earnings analysis, visit http://at.zacks.com/?id=3207.
Tech’s Impressive Earnings Power On Display
The blowout Apple report became the latest earnings release that built on the momentum we have been seeing from a diverse cross-section of companies this earnings season. The trend is particularly notable in the Technology sector, where not only the likes of Facebook and Google are shining, but even stodgier operators like Microsoft and Intel appear to have recaptured their mojo.
The law of large numbers doesn’t appear to have the same meaning for these Tech companies as it does for leaders in other sectors. After all, Apple’s +18.9% higher earnings in Q3 on +12.2% higher revenues are on a base of more than $9 billion in earnings and $46.9 billion in revenues in the year-earlier quarter. Importantly, Apple showed again that while iPhone may account for a bigger chunk of its business, it is by no means that only driver, as the +24% jump in the high-margin services revenue to $7.9 billion shows.
All in all, it has been an impressive earnings performance from the Technology sector, which should help ease concerns about the sector’s strong performance lately (the Zacks Tech sector is up +25.9% year-to-date vs. +15.3% gain for the S&P 500 and +6.2% gain for the Russell 2000).
For the Tech sector, we now have Q3 results from 85% of the sector’s market cap in the S&P 500 index. Total earnings for these Tech companies are up +22.4% from the same period last year on +9.3% higher revenues, with 81.8% beating EPS estimates and 86.4% beating revenue estimates.
As high as the proportion of Tech companies beating estimates is, the beats percentages are actually in-line with other recent quarters. But growth is notably accelerating.
Q3 Earnings Season Scorecard (as of Friday, November 3, 2017)
We now have Q3 results from 406 S&P 500 members that combined account for 85.4% of the index’s total market capitalization. Total earnings for these companies are up +7.5% from the same period last year on +6.3% higher revenues, with 73.9% beating EPS estimates and 66.7% beating revenue estimates.
Looking at Q3 as a whole, combining the actual results from the 406 S&P 500 members that have come out with estimates for the still-to-come 94 index members, total earnings are expected to be up +6.5% from the same period last year on +5.6% higher revenues. Excluding the weak results from the Finance sector, total earnings for the rest of the index would be up +9.6% on +6.1% revenue growth.
Four Takeaways From the Q3 Earnings Season
First, there is clear momentum on the revenue front, with growth notably accelerating from other recent periods. Total revenues for the 406 S&P 500 members that have reported results, as of Friday, November 3rd, are up +7.5% from the same period last year, which compares to +6.3% top-line growth for the same group of companies in the preceding quarter and still lower average growth rates in the prior periods.
Second, the above-average proportion of positive surprises that we saw in the preceding period has continued this earnings season as well. We typically don’t give positive surprises a lot of weight in evaluating or assessing an earnings season since we all know that management teams are experts in managing expectations. Even then, the trend emerging in the Q3 earnings season is noteworthy for two reasons. First, estimates for the quarter had not fallen by as much as had historically been the case. Second, the proportion of positive revenue surprises, a much harder variable to manipulate relative to earnings, is only a shade below the preceding quarter’s record level.
Third, the revisions trend for the December quarter is shaping up to be unusually favorable. The pattern over the last few years has been that as the quarterly earnings reporting season gets underway, estimates for the following quarter would start coming down. This trend improved a bit over the last few quarters when estimates would not fall by as much as was historically the case, but they were nevertheless coming down.
The unusual thing about the Q4 estimates is that they actually went up at first and have started coming down only over the last couple of days, which has brought Q4 growth expectations to where they stood at the start of the period. This is totally different from what we would typically see in the comparable periods of other earnings seasons over the last few years. This will most likely change as more companies report Q3 results and manage the market’s expectations for the December quarter, but it is nevertheless an unusually positive development.
About the Zacks Rank
Since 1988, the Zacks Rank has proven that "Earnings estimate revisions are the most powerful force impacting stock prices." Since inception in 1988, #1 Rank stocks have generated an average annual return of +28%. During the 2000-2002 bear market, Zacks #1 Rank stocks gained +43.8%, while the S&P 500 tumbled -37.6%. Also note that the Zacks Rank system has just as many Strong Sell recommendations (Rank #5) as Strong Buy recommendations (Rank #1). Since 1988, Zacks Rank #5 stocks have significantly underperformed the S&P 500 (+3% versus +10%). Thus, the Zacks Rank system allows investors to truly manage portfolio trading effectively.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has more than doubled the market from 1988 through 2016. Its average gain has been a stellar +25% per year. See these high-potential stocks free >>.
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performancefor information about the performance numbers displayed in this press release.