Tuesday, July 25, 2023

The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features a real-time update on the ongoing Q2 earnings season and new research reports on 16 major stocks, including Toyota Motor Corporation (TM), Deere & Company (DE) and Starbucks Corporation (SBUX). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.

You can see all of today’s research reports here >>>

Q2 Earnings Season Scorecard

Including all the results that came out this morning, we now have Q2 results from 122 S&P 500 members or 24.4% of the index's total membership. Total earnings for these 122 index members are up +1.2% from the same period last year on +7.1% higher revenues, with 81.1% beating EPS estimates and 63.9% beating revenue estimates.

The +1.2% earnings growth pace for this group of 122 index members is the first positive year-over-year earnings growth after 5 back-to-back quarters of declines.

The 81.1% EPS beats percentage is not only above what we had seen from this group of 122 S&P 500 members in recent quarters but is also above the 5-year average of 78.7%. This is notable since Q2 estimates had suffered fewer negative revisions relative to other recent quarters.

Looking at Q2 as a whole, combining the actuals that have come out with estimates for the sitll to come companies, total earnings are expected to be down -10.4% from the same period last year on -0.4% lower revenues.

Excluding the Energy sector drag, Q2 earnings for the rest of the S&P 500 index would be down -4.6% on +3.3% higher revenues.

Today's Featured Analyst Reports

Toyota Motor shares have modestly outperformed the Zacks Automotive - Foreign industry over the past year (+7.0% vs. +5.3%). Continued demand for vehicles and robust product line-up is set to fuel sales volumes of Toyota. To capitalize on the accelerated global shift to green cars, the auto giant is deepening focus on manufacturing electric and fuel-cell vehicles, which will bolster the company’s product competitiveness.

The ratio of electrified vehicles sold to total sales in fiscal 2023 was 29.6% and the company expects the ratio to increase to 37% in fiscal 2024. It aims to generate 40% of its global sales from EVs by 2025 and 70% by 2030 and expand global sales of BEVs to 3.5 million units a year by 2030.

The company plans to invest 4 trillion yen ($35 billion) for a line-up of 30 BEV by 2030. Its commitment to return capital to shareholders and upbeat fiscal 2024 view spark confidence. Thus, we are bullish on the stock.

(You can read the full research report on Toyota Motor here >>>)

Shares of Deere have outperformed the Zacks Manufacturing - Farm Equipment industry over the past year (+40.3% vs. +38.1%). The company is witnessing solid growth in order levels, which is expected to aid its top-line performance in the forthcoming quarters. Strong replacement demand will continue to boost the company's results.

Demand for its construction equipment will likely benefit from anticipated growth in infrastructure investments in the United States. Even though inflated material and labor costs are anticipated to impact the company's margins, the company's effort to improve pricing will somewhat help offset this impact. Product launches equipped with the latest technology to make farming automated will continue to provide Deere with an edge over its competitors.

The company is poised to benefit in the long run from rapid growth in the global population and the rising worldwide infrastructure needs. The earnings estimate for 2023 has lately moved north.

(You can read the full research report on Deere here >>>)

Starbucks shares have outperformed the Zacks Retail - Restaurants industry over the past year (+30.7% vs. +23.6%). The company is benefiting from solid comps growth in all its operational segments along with impressive revenue recovery from China after COVID-19.

Improving customer experience with innovative new store designs and upgraded product offerings, and supply-chain efficiencies bode well for the company. Also, the company’s focus on product innovation and store growth adds to its growth. For fiscal 2023, the company expects consolidated revenues and global comparable store sales to be in the range of 10-12% and the high end of 7-9%, respectively, year over year.

However, earnings estimates for fiscal 2023 have moved south in the past 7 days.  Increased expenses and inflation are major concerns to the company’s growth trend.

(You can read the full research report on Starbucks here >>>)

Other noteworthy reports we are featuring today include AbbVie Inc. (ABBV), Equinor ASA (EQNR) and DexCom, Inc. (DXCM).

Director of Research

Sheraz Mian

Note: Sheraz Mian heads the Zacks Equity Research department and is a well-regarded expert of aggregate earnings. He is frequently quoted in the print and electronic media and publishes the weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here>>>