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Microsoft, H&R Block, Facebook, Qualcomm and Gilead highlighted as Zacks Bull and Bear of the Day

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For Immediate Release

Chicago, IL – July 26, 2018 – Zacks Equity Research highlights Microsoft (MSFT - Free Report) as the Bull of the Day, H&R Block (HRB - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Facebook , Qualcomm (QCOM - Free Report) and Gilead (GILD - Free Report) .

Here is a synopsis of all five stocks:

Bull of the Day:

Headquartered in Redmond, WA, Microsoft is one of the largest broad-based technology providers in the world. While software is the most important revenue source, the company also provides hardware and online services.

Additionally, Microsoft offers support services in the form of consultation, training and certification of system integrators and developers.

Excellent Results Driven by Cloud

Microsoft reported fourth-quarter fiscal 2018 earnings of $1.13 per share, ahead the Zacks Consensus Estimate of $1.07. Earnings were up 6.6% on a year-over-year basis.

Revenues surged 17.5% year-over-year to $30.09 billion and beat our estimate of $29.21 billion. Revenue from the Intelligent Cloud segment, which includes its Azure business, increased 23% while Azure revenue increased 89%.

Annual revenue topped $100 billion for the first time.

“Our early investments in the intelligent cloud and intelligent edge are paying off, and we will continue to expand our reach in large and growing markets with differentiated innovation.” said the CEO.

The guidance was also quite strong.

Earlier, the company announced that Walmart had signed a five-year deal to use its cloud services.

During the quarter, the company had announced that it is acquiring coding-collaboration site GitHub for $7.5 billion. They had acquired LinkedIn in 2016 for $27 billion.

These acquisitions continue to expand Microsoft’s total addressable market.

Rising Estimates

After a strong quarterly report, analysts have significantly raised their estimates for the company.

Zacks Consensus Estimates for the current and the next fiscal year have increased to $4.25 per share and $4.75 per share respectively, from $3.96 per share and $4.52 per share, before the results.

The company has missed only twice in the past twenty quarters as you can see from the beautiful chart below. The average surprise for the past four quarters was 11.4%.

Bear of the Day:

Founded in 1955 and headquartered in Kansas City, MO, H&R Block is a global consumer tax services provider. 

The company offers tax services through retail tax offices in the US, Canada and Australia, and its H&R Block at Home software and online solutions. It provides tax return preparation services with the help of professional tax preparers in approximately 12,000 company-owned and franchise retail tax offices worldwide, and through H&R Block tax software products.

Quarterly Results

H&R Block reported the results for its fourth-quarter FY 2018 ended Apr 30, on June 12. Adjusted earnings from continuing operations came in at $5.43 per share, beating the Zacks Consensus Estimate of $5.26.

Strong revenue growth drove results during the quarter.  

The company announced that it is closing 400 U.S. offices as the new tax law makes tax filing simpler. They also said that they will increase their technology spending.

“We aren’t as relevant as we need to be to today’s consumer,” said H&R Block CEO during a conference call with analysts. “By differentiating ourselves and demonstrating why we are the best choice for consumers, we will position H&R Block as a modern brand with momentum.”

Estimates Slashed

Analysts have slashed their estimates significantly after quarterly results and store closure news. Zacks Consensus Estimates for the current and next year are down to $1.91 per share and $2.09 per share respectively, down from $2.38 each, before the results.

The stock plunged about 18% after the earnings and store closure report and is now down more than 6% this year.

Bottom Line

While H&R Block’s results were better than expected, the company’s outlook is somewhat cloudy given recent tax law changes. It is better for investors to avoid this stock.

Additional content:

Facebook Misses 1st Time in 11 Quarters, Plus GILD & QCOM

For the first time since Q4 2015, Facebook has missed earnings expectations, putting up $1.74 per share. True, it's only a one-penny miss, but revenues also came in lower than expected -- $13.23 billion versus $13.43 billion in the Zacks consensus. Shares have fallen 9% on the news in late trading upon the earnings release.

Both Monthly Active Users (MAU) and Daily Active Users (DAU) also missed analysts' expectations for the quarter. MAUs of 2.23 billion was a tad short of the 2.25 billion estimated, and DAUs reached 1.47 billion, down from the 1.49 billion expected. The company stated that 66% of Monthly Active Users check in with Facebook daily. Revenues rose another 42% in the quarter year over year, though this is still down from the 49% anticipated. Ahead of the release, Facebook had issued warnings that user numbers were expected to flatten.

Though, if you think about this in sheer numbers, Facebook is still demonstrating that it is a tremendous success. Average Revenue per User (ARPU) rose 2 cents to $5.77, which is a truly excellent number. Keep in mind also that this was supposed to be the quarter where customers were going to be down on Facebook. How many companies would trade their "good" quarterly showings with Facebook's "bad" Q2 numbers?

Cap-ex has gone up for the company, as expected -- $3.46 billion illustrates Facebook's Investment and Safety segments. Headcount is up 47% year over year to 30,275 employees; many of these are monitoring accounts and fighting off abuse of the social network. For more on FB's earnings, click here.

Qualcomm, meanwhile, has blown the doors of expectations for its fiscal Q3 2018: earnings of $1.01 per share far outperformed the 71 cents expected, and revenues of $5.6 billion easily surpassed the $5.2 billion in the Zacks consensus. Earnings also outpaced the year-ago figure of 83 cents per share. The company also announced a new share buyback program, to the tune of $30 billion overall. Shares are up nearly 3% in after-market trading.

Gilead also zoomed way past analysts' expectations in its Q2 earnings this afternoon, posting $1.91 per share on $5.65 billion in quarterly sales. Estimates had been for $1.55 per share on $5.18 billion in revenues. Surprisingly, however, Gilead CEO John Milligan has announced he will be stepping down from the head of the company by year's end; no immediate replacement has been named. Shares of GILD are up 4% in late-market trading.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>

Get today’s Zacks #1 Stock of the Day with your free subscription to Profit from the Pros newsletter:

About the Bull and Bear of the Day

Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

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 nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year. See these high-potential stocks free >>.

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