Tuesday, January 23, 2024

The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features a real-time scorecard of the Q4 earnings season and fresh analyst reports on 16 major stocks, including Amazon.com, Inc. (AMZN), The Home Depot, Inc. (HD) and Merck & Co., Inc. (MRK). 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 Scorecard

Including all the results that came out this morning, we now have Q4 results from 67 S&P 500 members or 13.4% of the index's total membership. Total earnings for these companies are up +0.3% from the same period last year on +3.9% higher revenues, with 83.6% beating EPS estimates and 67.2% beating revenue estimates.

This is a notably weaker earnings and revenue growth pace for these 67 index members relative to what we saw from this group of companies in other recent quarters.

While the Q4 revenue growth for these companies is in-line with the decelerating growth trend that has been in place for the last few quarters, the sub-par earnings growth is primarily because of the Finance sector drag.

Had it not been for the -2.7% earnings decline for the Finance sector at this stage, with 31.1% of the sector's companies having reported Q4 results, total earnings for the rest of the index members that have reported would be up +3.3% (vs. up +0.3% including Finance).

The Q4 EPS beats percentage of 83.6% for this group of 67 index members is unchanged from the preceding period (2023 Q3) and compares to the 20-quarter average of 78.2% for this cohort.

The Q4 revenue beats percentage of 67.2% is up from 65.7% in the preceding period and compares to the 20-quarter average of 69.4% for this group of 67 index members.

Looking at Q4 as a whole, combining the actuals that have come out with estimates for the still-to-come companies, total earnings for the S&P 500 index are expected to be up +0.5% from the same period last year on +2.3% higher revenues.

Today's Featured Analyst Reports

Amazon.com shares have outperformed the Zacks Internet - Commerce industry over the past six months (+20.2% vs. +14.7%). The company is gaining on solid Prime momentum owing to ultrafast delivery services and strong content portfolio. Strengthening relationship with third-party sellers is a positive.

Additionally, strong adoption rate of AWS is aiding the company’s cloud dominance. Expanding AWS services portfolio is continuously helping Amazon in gaining further momentum among the customers. Robust Alexa skills and expanding smart home products portfolio are positives.

The company’s strong global presence and solid momentum among the small and medium businesses remain tailwinds. However, inflationary pressure, geopolitical tensions and foreign currency headwinds remain concerns.

(You can read the full research report on Amazon.com here >>>)

Shares of Home Depot have outperformed the Zacks Building Products - Retail industry over the past six months (+11.1% vs. +8.8%). The company has been witnessing benefits from the execution of the “One Home Depot” investment plan, which focuses on expanding supply chain facilities, technology investments and enhancement to the digital experience.

The interconnected retail strategy and underlying technology infrastructure have helped consistently boost web traffic for the past few quarters. It on track with its strategic investments to build a Pro ecosystem.

However, Home Depot's top and bottom-lines declined year over year in third-quarter fiscal 2023. Results were impacted by a deflation in lumber and copper and pressures from softness in big-ticket discretionary categories, which weighed on comps.

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

Merck shares have gained +13.1% over the past year against the Zacks Large Cap Pharmaceuticals industry’s gain of +20.5%. The company’s products like Keytruda and Gardasil have been driving sales. With continued label expansion into new indications, particularly earlier-stage launches, Keytruda is expected to remain a key top-line driver.

Animal health and vaccine products are core growth drivers. Merck boasts a strong cancer pipeline, including Keytruda, which should drive long-term growth. Merck is investing in M&A activity to strengthen its pipeline.

However, generic competition for several drugs and rising competitive pressure, mainly on the diabetes franchise, will continue to be overhangs on the top line. There are concerns about Merck’s ability to grow its non-oncology business ahead of Keytruda’s loss of exclusivity later in the decade.

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

Other noteworthy reports we are featuring today include Tesla, Inc. (TSLA), PepsiCo, Inc. (PEP) and Accenture plc (ACN).

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>>>