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Note: The following is an excerpt from this week’s Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>
Here are the key points:
Total Q4 earnings for the 176 S&P 500 members that have reported results are up +1.7% from the same period last year on +2.6% higher revenues, with 81.8% beating EPS estimates and 69.3% beating revenue estimates.
Looking at Q4 as a whole, combining the actual results that have come out with estimates for the still-to-come companies, total S&P 500 index earnings are currently expected to be up +2.4% from the year-earlier level on +2.8% higher revenues, which would follow the +3.8% earnings growth in 2023 Q3 on +2.0% higher revenues.
For the Tech sector, we now have Q4 results for 46.8% of the sector’s market capitalization in the index. Total earnings for these Tech companies are up +19.3% from the same period last year on +6.6% higher revenues, with 82.1% beating EPS estimates and 75% beating revenue estimates.
The Q4 earnings and revenue growth rates for these Tech companies are notably tracking higher than what we have seen from these companies in other recent periods, though the EPS and revenue beats percentages are tracking modestly below other recent periods and the 20-quarter average.
The market’s darling mega-cap Tech companies that we have been referring to as the ‘Big 7 Tech Players’ and everyone else as ‘Magnificent 7’, or ‘Mag 7’ for short, have started reporting results, with Microsoft (MSFT - Free Report) , Alphabet (GOOGL - Free Report) and Tesla (TSLA - Free Report) now out with their December-quarter results. The still-to-come reports from this exalted club are comprised of Amazon (AMZN - Free Report) , META (META - Free Report) , Apple (AAPL - Free Report) , and Nvidia (NVDA - Free Report) .
Total Q4 earnings for the ‘Mag 7’ (we have thrown in the towel and will be referring to the group by the same name) are expected to be up +41.3% from the same period last year on +13% higher revenues, which would follow the group’s +54.2% higher earnings on +12.9% higher revenues in 2023 Q3.
You can see the group’s earnings and revenue growth picture in the chart below.
Image Source: Zacks Investment Research
Concerning the market reactions to the Microsoft and Alphabet results, both of these stocks had climbed significantly heading into the releases, on top of last year’s impressive gains, suggesting that a sell-the-news type of reaction was the most likely outcome. Microsoft's results were relatively more impressive than Alphabet’s numbers, but both companies came out with solid results.
Microsoft’s Q4 earnings were up +25.9% on +17.6% higher revenues, while the same for Alphabet were up +51.8% on +14.6% higher revenues. Both companies came out with cloud revenues that represented acceleration over the preceding period, with Microsoft’s cloud revenues up +30% from the same period last year and Alphabet’s relatively smaller cloud business enjoying revenue growth of +26%.
The market’s issue with the Alphabet report is related to the company’s core ad business, which showed lower-than-expected growth of +11%.
The market reactions to these results notwithstanding, for companies the size of Microsoft and Alphabet to be able to achieve this magnitude of top- and bottom-line gains in this macro backdrop speaks to their enormous earnings power.
The chart below shows the group’s growth picture on an annual basis.
Image Source: Zacks Investment Research
Beyond the Mag 7, Q4 earnings for the S&P 500 index are currently expected to be up +2.4% above the year-earlier period on +2.8% higher revenues. This would follow the +3.8% increase in index earnings in 2023 Q3 on +2.3% higher revenues.
The chart below shows the overall earnings picture on a quarterly basis.
Image Source: Zacks Investment Research
As you can see from these quarterly earnings-growth expectations, the growth picture is expected to steadily improve over the next few quarters.
Below, we show the overall earnings picture for the S&P 500 index on an annual basis.
Image Source: Zacks Investment Research
Given the expected moderation in the U.S. economy’s growth trajectory due to the cumulative effects of Fed tightening, these estimates likely need to come down. Some of that downward adjustment is already happening, as seen in the chart below.
Image Source: Zacks Investment Research
As we have noted before, full-year 2024 estimates started coming down in October, with the trend continuing in November and early December, but appear to have stabilized in recent weeks.
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Q4 Earnings: Tech Flexes Strong Growth
Note: The following is an excerpt from this week’s Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>
Here are the key points:
The market’s darling mega-cap Tech companies that we have been referring to as the ‘Big 7 Tech Players’ and everyone else as ‘Magnificent 7’, or ‘Mag 7’ for short, have started reporting results, with Microsoft (MSFT - Free Report) , Alphabet (GOOGL - Free Report) and Tesla (TSLA - Free Report) now out with their December-quarter results. The still-to-come reports from this exalted club are comprised of Amazon (AMZN - Free Report) , META (META - Free Report) , Apple (AAPL - Free Report) , and Nvidia (NVDA - Free Report) .
Total Q4 earnings for the ‘Mag 7’ (we have thrown in the towel and will be referring to the group by the same name) are expected to be up +41.3% from the same period last year on +13% higher revenues, which would follow the group’s +54.2% higher earnings on +12.9% higher revenues in 2023 Q3.
You can see the group’s earnings and revenue growth picture in the chart below.
Image Source: Zacks Investment Research
Concerning the market reactions to the Microsoft and Alphabet results, both of these stocks had climbed significantly heading into the releases, on top of last year’s impressive gains, suggesting that a sell-the-news type of reaction was the most likely outcome. Microsoft's results were relatively more impressive than Alphabet’s numbers, but both companies came out with solid results.
Microsoft’s Q4 earnings were up +25.9% on +17.6% higher revenues, while the same for Alphabet were up +51.8% on +14.6% higher revenues. Both companies came out with cloud revenues that represented acceleration over the preceding period, with Microsoft’s cloud revenues up +30% from the same period last year and Alphabet’s relatively smaller cloud business enjoying revenue growth of +26%.
The market’s issue with the Alphabet report is related to the company’s core ad business, which showed lower-than-expected growth of +11%.
The market reactions to these results notwithstanding, for companies the size of Microsoft and Alphabet to be able to achieve this magnitude of top- and bottom-line gains in this macro backdrop speaks to their enormous earnings power.
The chart below shows the group’s growth picture on an annual basis.
Image Source: Zacks Investment Research
Beyond the Mag 7, Q4 earnings for the S&P 500 index are currently expected to be up +2.4% above the year-earlier period on +2.8% higher revenues. This would follow the +3.8% increase in index earnings in 2023 Q3 on +2.3% higher revenues.
The chart below shows the overall earnings picture on a quarterly basis.
Image Source: Zacks Investment Research
As you can see from these quarterly earnings-growth expectations, the growth picture is expected to steadily improve over the next few quarters.
Below, we show the overall earnings picture for the S&P 500 index on an annual basis.
Image Source: Zacks Investment Research
Given the expected moderation in the U.S. economy’s growth trajectory due to the cumulative effects of Fed tightening, these estimates likely need to come down. Some of that downward adjustment is already happening, as seen in the chart below.
Image Source: Zacks Investment Research
As we have noted before, full-year 2024 estimates started coming down in October, with the trend continuing in November and early December, but appear to have stabilized in recent weeks.