Tuesday, January 2, 2024

The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features an update on the Q4 earnings season and new research reports on 16 major stocks, including McDonald's Corporation (MCD), The Walt Disney Company (DIS) and Applied Materials, Inc. (AMAT). 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 >>> 

Q4 Earnings Season Update

The Q4 earnings season will really get going when JPMorgan, Bank of America and the other big banks report their December-quarter results on Friday, January 12th. But the reporting cycle has actually gotten underway already, with results from 19 S&P 500 members out already.

All of these 19 index members, which includes such bellwethers like FedEx, Nike, Oracle and others, have reported results for their fiscal quarters ending in November. We count all of these November-quarter results as part of our December-quarter tally.

Total earnings for these 19 index members are up +8.8% from the same period last year on +4.6% higher revenues, with 89.5% beating EPS estimates and 52.6% beating revenue estimates. This is a notably earnings and revenue growth pace for these companies relative to what we have seen from them in other recent periods.

The 89.5% EPS beats percentage compares to 84.2% for this group of companies in each of the preceding three peirods and the average for the preceding 20 periods (5 years) of 80.1%.

The 52.6% revenue beats percentage is notably below what we had seen from this group of 19 index members in recent quarters and the 20-quarter average of 72%.

In fact, the 52.6% revenue beats percentage for this group of 19 index members is the lowest we had seen for this group of companies in the last 20 periods.

It may not be appropriate to draw any firm conclusions from this set of early data, but it nevertheless points towards some early weak spots in the overall earnings picture.

Looking at the blended Q4 picture, total earnings for the S&P 500 index are expected to be down -0.4% from the same period last year on +2.3% higher revenues.

Please note that the estimate revisions trend has notably stabilized in recent days, after appearing to have weakened in October and November 2023.

Today's Featured Analyst Reports  

McDonald's shares have outperformed the Zacks Retail - Restaurants industry over the past year (+14.7% vs. +11.9%). The company is benefiting from robust comparable restaurant sales growth, menu price increase and positive guest counts. Also, its emphasis on digital initiatives, marketing efforts, campaigns and loyalty programs bodes well.

The company is scheduled to report Q4 results on January 30th. The stock was up following the last quarterly release on October 30th, with digital sales (from the top six markets) at $9 billion, contributing 40% to the company’s system-wide sales. Given the rise in digital adoption, the company remains optimistic and anticipates the initiatives to drive sales and average checks in the upcoming periods.

Earnings estimates for 2023 have increased in the past 30 days, depicting analysts’ optimism about the stock’s growth potential. However, inflationary pressures and stiff competition are primary headwinds.

(You can read the full research report on McDonald’s here >>>)

Shares of Walt Disney have outperformed the Zacks Media Conglomerates industry over the past year (+1.8% vs. -3.2%). The company is benefiting from a solid revival in the domestic and international theme park businesses. Upcoming attractions like the Frozen theme land at Hong Kong Disneyland and Walt Disney Park in Paris, as well as the Zootopia theme land at Shanghai Disney, are expected to boost the prospects of the theme park business.

However, Disney’s declining ad revenues due to fewer impressions have been a headwind for some time now. Disney+’s profitability is expected to be negatively impacted by higher investments in content, which will increase programming and production costs at Media and Entertainment Distribution.

Its leveraged balance sheet remains a concern. Disney+ is facing tough competition in the streaming market from the likes of Netflix and Amazon Prime Video.

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

Applied Materials shares have outperformed the Zacks Semiconductor Equipment - Wafer Fabrication industry over the past year (+69.1% vs. +54.9%). The company is benefiting from strength in Applied Global Services segment. Growing adoption of 200-mm systems and strengthening subscription business remain tailwinds.

Also, improving Display segment remains a major plus. AMAT remains optimistic about its strategies and investments in IoT and AI. Additionally, its strength in IoT, Communications, Auto, Power and Sensors (ICAPS) is likely to continue aiding its position in the semiconductor industry in the days ahead.

Further, its broad-based, diversified portfolio and strong services business remain its key growth drivers. However, weakness in leading-edge foundry logic and NAND is a major concern. Also, weakening demand environment and inflationary pressure are headwinds.

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

Other noteworthy reports we are featuring today include Eaton Corporation plc (ETN), Altria Group, Inc. (MO) and Crown Castle Inc. (CCI).

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>>>