Today's Must Read
New Branches, Loan Balance Aid JPMorgan (JPM) Amid Low Rates
High Speed Internet Subscriber Gain Benefits Comcast (CMCSA)
Wednesday, November 25, 2020
The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features an update on the ongoing Q3 earnings season, in addition to featuring new research reports on 16 major stocks, including Tesla (TSLA), JPMorgan Chase (JPM) and Comcast (CMCSA). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Q3 Earnings Seasons Scorecard
Including this morning's results from Deere & Co. (DE) and last evening's results from Gap (GPS), Nordstrom (JWN) and others, we now have seen Q3 results from 488 S&P 500 members. Total earnings for these companies are down -7.6% on -1% lower revenues, with 84.8% beating EPS estimates and 76.8% beating revenue estimates.
This is notably better performance relative to what we saw from this group of companies in the first three quarters of the year. The EPS and revenue beats percentages are the highest in recent years. Importantly, estimates for the current period (2020 Q4) have gone up since the quarter got underway, with the current -11.3% earnings decline up from -13.4% at the end of September.
For full year 2020, total S&P 500 earnings are expected to be down -17% on -4.1% lower revenues, with easy comparisons and upward revisions helping 2021 earnings growth reach +21.6%. This approximates to an index 'EPS' of $132.72 in 2020 and $161.39 in 2021.
Tesla shares have practically been on fire lately, with the stock up 563.8% in the year-to-date period. Driving this momentum is a combination of first-mover advantage in the e-mobility space with high range vehicles, superior technology, and software edge.
Robust Model 3 demand, ramp up of Model Y production, Shanghai Gigafactory prospects, amazing line-up of upcoming products and aggressive expansion efforts bode well for the firm. Tesla’s S&P 500 inclusion news has further boosted investors' confidence. However, high R&D, SG&A costs and massive capex may clip the margins.
Tesla is investing heavily to boost production capacity and build gigafactories in Berlin and Austin, which are likely to strain its near-term prospects. Waning margins for Model S/X and lofty valuation of the firm are other concerns. Thus, investors are recommended to wait for a better entry point.
Shares of JPMorgan have lost -6.3% over the past year against the Zacks Major Regional Banks industry’s loss of -18.1%. The Zacks analyst believes that branch openings in new regions, acquisition of InstaMed, strong mortgage banking business and focus on credit card operations are likely to continue supporting the bank's financials.
Further, despite restriction of capital deployments to conserve liquidity, the company’s cash position remains robust. However, the Federal Reserve’s accommodative policy and near-zero rates are expected to hurt the bank’s interest income and margins.
Also, coronavirus-induced economic downturn is likely to continue hampering business activities. Thus, loan demand will be muted in the near term.
Comcast shares have gained +32.5% over the past six months against the Zacks Cable Television industry’s rise of +26.4%. The Zacks analyst believes that Comcast is benefiting from solid high-speed Internet customer wins.
Its strategy to provide high-speed Internet at an affordable price plays a pivotal role in providing connectivity and improving customer experience. Moreover, coronavirus-led increased media consumption, and work-from-home and online-learning waves bode well for Comcast’s Internet business.
Moreover, its streaming service Peacock has gained significant tract within a short span of time and is a key catalyst in driving broadband sales. However, Comcast persistently suffers from video-subscriber attrition due to cord cutting. Theme park revenues are expected to suffer from indefinite closure of Hollywood park. Further, weakness in film business is also a headwind. Moreover, a leveraged balance sheet is a concern.
Other noteworthy reports we are featuring today include Thermo Fisher Scientific (TMO), Oracle (ORCL) and Boeing (BA).
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Director of Research
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>>>