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Earnings season is well underway, with a wide variety of companies delivering quarterly results daily. The major banks came out and posted solid results, kicking off the period positively.
And in the coming weeks, investors will have plenty of quarterly prints to sort through daily.
However, next week’s results will be significant as mega-cap technology begins unveiling their results. We’ve got Meta Platforms (META - Free Report) , Microsoft (MSFT - Free Report) , and Alphabet (GOOGL - Free Report) all set to report.
The technology sector has been the best place to park cash in 2023, a welcomed development after a forgettable 2022.
As of Wednesday, July 19th, the technology sector’s earnings are expected to slip -4.5% in Q2 on flat revenues, which would follow the decline of -10.3% on -2.9% lower revenues in the preceding quarter (2023 Q1).
As we can see below, the sector’s growth pace is expected to improve from next quarter onwards, expected to turn positive in the second half of the year.
But how do top and bottom-line estimates stack up for the mega-cap technology titans? Let’s take a closer look.
Microsoft
Earnings estimates for Microsoft’s quarter to be reported have primarily remained stable, with the $2.55 per share estimate down marginally over the last several months. The tech titan is forecasted to post solid growth, with the quarterly estimate reflecting a 15% year-over-year improvement in earnings.
Image Source: Zacks Investment Research
Revenue expectations have also primarily remained stable, with the $55.4 billion quarterly estimate up a fractional 0.2% since the end of April and suggesting an improvement of 6.7% from the year-ago period. MSFT’s revenue has remained on a healthy trend, as we can see in the chart below.
Image Source: Zacks Investment Research
Undoubtedly a major positive, the tech titan recently unveiled its pricing for its Microsoft 365 Copilot, priced at $30 a month. It’s reasonable to assume that analysts could begin taking their earnings expectations higher amid the favorable development, but no revisions have hit the tape yet.
Meta Platforms
Analysts have remained optimistic for META’s quarter, with the $2.87 per share estimate up nearly 5% since the end of April and implying an improvement of 17% year-over-year. META delivered a big beat in its latest release, exceeding the Zacks Consensus EPS estimate by nearly 35%.
Image Source: Zacks Investment Research
In addition, META’s revenue outlook has seen improvement, with the $30.9 billion quarterly revenue estimate up 2% since April and implying growth of 7% from the same period last year.
Image Source: Zacks Investment Research
META shares aren’t as rich as other mega-cap tech stocks, with the current 25.2X forward earnings multiple sitting modestly above the 23.1X five-year median. Given the company’s forecasted growth, shares look highly attractive from a valuation perspective.
Image Source: Zacks Investment Research
Alphabet
Similar to MSFT, analysts have hardly moved their earnings expectations for the quarter to be reported, with the $1.32 per share estimate down a marginal 0.8% over the last several months. The Google parent continues to grow, with the estimate reflecting 9% higher earnings.
Image Source: Zacks Investment Research
Alphabet is expected to bring in $60.3 billion in sales, 5% higher than the year-ago period. Analysts haven’t had much to say regarding the top line, with the quarterly estimate up a tiny 0.1% since April.
And similar to META, Alphabet shares aren’t expensive on a relative basis, with the current 22.1X forward earnings multiple sitting nicely beneath the 25.2X five-year median. The stock carries a Value Style Score of C.
Image Source: Zacks Investment Research
Bottom Line
The real fun begins next week when mega-cap tech begins reporting.
We’ve got several notable market heavyweights on the schedule, including Microsoft (MSFT - Free Report) and Alphabet (GOOGL - Free Report) , after the market’s close on Tuesday, July 25th. Meta Platforms (META - Free Report) will report on the following day, July 26th, after the market’s close.
It’s reasonable to assume that some of the earnings positivity has already been priced into these companies’ shares, given their remarkable outperformance in 2023. In addition, we’ll likely see volatility tick higher amid the releases.
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Mega-Cap Tech Earnings Looming: Buy or Sell?
Earnings season is well underway, with a wide variety of companies delivering quarterly results daily. The major banks came out and posted solid results, kicking off the period positively.
And in the coming weeks, investors will have plenty of quarterly prints to sort through daily.
However, next week’s results will be significant as mega-cap technology begins unveiling their results. We’ve got Meta Platforms (META - Free Report) , Microsoft (MSFT - Free Report) , and Alphabet (GOOGL - Free Report) all set to report.
The technology sector has been the best place to park cash in 2023, a welcomed development after a forgettable 2022.
As of Wednesday, July 19th, the technology sector’s earnings are expected to slip -4.5% in Q2 on flat revenues, which would follow the decline of -10.3% on -2.9% lower revenues in the preceding quarter (2023 Q1).
As we can see below, the sector’s growth pace is expected to improve from next quarter onwards, expected to turn positive in the second half of the year.
Image Source: Zacks Investment Research
For a detailed analysis of Q2 earnings, I invite you to view our weekly Earnings Trends report -> Q2 Earnings Season Gets Off to a Positive Start.
But how do top and bottom-line estimates stack up for the mega-cap technology titans? Let’s take a closer look.
Microsoft
Earnings estimates for Microsoft’s quarter to be reported have primarily remained stable, with the $2.55 per share estimate down marginally over the last several months. The tech titan is forecasted to post solid growth, with the quarterly estimate reflecting a 15% year-over-year improvement in earnings.
Image Source: Zacks Investment Research
Revenue expectations have also primarily remained stable, with the $55.4 billion quarterly estimate up a fractional 0.2% since the end of April and suggesting an improvement of 6.7% from the year-ago period. MSFT’s revenue has remained on a healthy trend, as we can see in the chart below.
Image Source: Zacks Investment Research
Undoubtedly a major positive, the tech titan recently unveiled its pricing for its Microsoft 365 Copilot, priced at $30 a month. It’s reasonable to assume that analysts could begin taking their earnings expectations higher amid the favorable development, but no revisions have hit the tape yet.
Meta Platforms
Analysts have remained optimistic for META’s quarter, with the $2.87 per share estimate up nearly 5% since the end of April and implying an improvement of 17% year-over-year. META delivered a big beat in its latest release, exceeding the Zacks Consensus EPS estimate by nearly 35%.
Image Source: Zacks Investment Research
In addition, META’s revenue outlook has seen improvement, with the $30.9 billion quarterly revenue estimate up 2% since April and implying growth of 7% from the same period last year.
Image Source: Zacks Investment Research
META shares aren’t as rich as other mega-cap tech stocks, with the current 25.2X forward earnings multiple sitting modestly above the 23.1X five-year median. Given the company’s forecasted growth, shares look highly attractive from a valuation perspective.
Image Source: Zacks Investment Research
Alphabet
Similar to MSFT, analysts have hardly moved their earnings expectations for the quarter to be reported, with the $1.32 per share estimate down a marginal 0.8% over the last several months. The Google parent continues to grow, with the estimate reflecting 9% higher earnings.
Image Source: Zacks Investment Research
Alphabet is expected to bring in $60.3 billion in sales, 5% higher than the year-ago period. Analysts haven’t had much to say regarding the top line, with the quarterly estimate up a tiny 0.1% since April.
And similar to META, Alphabet shares aren’t expensive on a relative basis, with the current 22.1X forward earnings multiple sitting nicely beneath the 25.2X five-year median. The stock carries a Value Style Score of C.
Image Source: Zacks Investment Research
Bottom Line
The real fun begins next week when mega-cap tech begins reporting.
We’ve got several notable market heavyweights on the schedule, including Microsoft (MSFT - Free Report) and Alphabet (GOOGL - Free Report) , after the market’s close on Tuesday, July 25th. Meta Platforms (META - Free Report) will report on the following day, July 26th, after the market’s close.
It’s reasonable to assume that some of the earnings positivity has already been priced into these companies’ shares, given their remarkable outperformance in 2023. In addition, we’ll likely see volatility tick higher amid the releases.