This earnings season has been much better than originally feared… and we have the Large Caps to thank for a lot of that.
The big boys have been beating expectations and then moving higher. But this shouldn’t come as too much of a surprise. Once these giants start moving in the right direction, they tend to keep that momentum going. So investors would be ahead of the game if they paid attention to a Large Cap’s Zacks Rank and earnings surprise history.
Below are three big names that you already know all about. Each one of them recently reported strong quarterly results and are proving that small caps aren’t the only ones who can consistently beat the market.
Microsoft (MSFT - Free Report)
In the ‘glamorous’ tech space where ‘sexy’ stocks live or die on one idea in hopes of becoming a household name, there’s something comforting about good old Microsoft (MSFT - Free Report) still being able to innovate while remaining one of the most stable names in the market.
In fact, it’s so stable that this software giant is the only publicly-traded U.S. company that’s worth more than $1 Trillion. The stock is also up 40% year to date. Not bad for an old guy that IPO’d all the way back in 1986.
Of course, MSFT is still the leader in operating systems with a majority of the PCs around the world using its products. It’s also a leader in gaming hardware through Xbox.
But investors these days are most interested and impressed in the company’s cloud computing opportunity. In its fiscal fourth quarter, revenue for the Intelligent Cloud unit jumped 19% to $11.4 billion.
The unit’s growth led to another quarterly outperformance for MSFT. Earnings per share of $1.37 beat the Zacks Consensus Estimate by more than 13%. It has now put together 13 straight quarters of positive surprises with an average beat of more than 11% in the past four.
Revenue jumped 12% to $33.7 billion, which also surpassed our expectation for $32.7 billion.
Earnings estimates moved higher since the report, underscoring its status as a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for this fiscal year (ending June 2020) is up 2.2% over the past 30 days, while next fiscal year (ending June 2021) has advanced 2.4% in that time.
Most importantly though, analysts expect earnings to jump 13.2% next fiscal year over this one, which shows that the market believes MSFT can continue growing and beating market expectations.
Comcast (CMCSA - Free Report)
Consumers are abandoning cable T.V. in record numbers, which means an industry staple like Comcast (CMCSA - Free Report) is in BIG trouble. Right?
Well, not exactly. The conventional wisdom of people cutting the cord to focus on streaming services is definitely happening right now and will continue.
Contrary to CW though, that doesn’t spell doom for Comcast. You need only look at its second-quarter report for proof.
CMCSA has an impressive history of beating the Zacks Consensus Estimate, which it continued last week with earnings per share of 78 cents. The result was 4% better than the Zacks Consensus Estimate and 13% better than the previous year’s 65 cents.
The past 4 quarters have an average beat of about 7.2%.
Consolidated revenues of nearly $26.9 billion improved more than 23% year-over-year.
It’s long been time for consumers to stop thinking of CMCSA as just a cable company. A big reason for these solid results is the solid growth in residential high-speed Internet customers.
It added 209,000 Internet subscribers in the quarter, which is great news because it lost more than 224,000 video subscribers.
Furthermore, Xfinity Mobile continues to grow and the company plans to enter the streaming fray next year with an advertising-based service that includes its ample library of content.
Earnings estimates for this year and next have been slowly but steadily moving higher. The Zacks Consensus Estimate for 2020 is $3.37, which suggests a year-over-year improvement of 10.5% from this year’s $3.05.
Shares of CMCSA have jumped nearly 31% this year.
Starbucks (SBUX - Free Report)
So what are you going to do while enjoying Microsoft and Comcast services on your computer or tv?
You’re going to drink coffee of course! And since there seems to be a location on every street corner, you probably bought your cup at Starbucks (SBUX - Free Report) .
The coffee giant has soared 50% so far this year and recently reported its fifth straight quarter with a positive surprise. It has a four-quarter average beat of 9% and hasn’t missed since October 2015.
In its fiscal third quarter, earnings per share of 78 cents topped the Zacks Consensus Estimate by 8.3% and improved from last year by 26%.
Total revenues of $6.8 billion also topped our expectations while improving 8% from last year. Global same-store sales increased 6%.
The quarter’s results benefited from a strong performance in the Americas and China-Asia-Pacific segments, store openings, digitalization and an enhanced customer experience.
The above-mentioned statement of a Starbucks store on every corner may have been an exaggeration… but not a big one. The company opened 442 stores worldwide in the quarter, brining the total store count to 30,626.
Over the past 30 days, the Zacks Consensus Estimate for this fiscal year (ending September 2019) is up 1.4% and next fiscal year (ending September 2020) is up 1%.
Analysts currently see $3.13 per share for next fiscal year, which would mark an 11% improvement over this year.
These stocks were found through the Top Ranked Large Caps premium screen. Click here to see all of the stocks that passed the criteria.
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