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Research Daily

Sheraz Mian

Q4 Earnings Season Update and Analyst Reports for BHP, Starbucks & Snap


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Friday, December 11, 2020

The Zacks Research Daily presents the best research output of our analyst team. In addition to featuring new research reports on 16 major stocks, today's note provides an update on the Q4 earnings season. The research reports featured today 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 quarterly reports from Oracle (ORCL), Adobe (ADBE), Costco (COST) and AutoZone (AZO) over the last few days for their respective fiscal quarters ending in November get counted as Q4 results. The bulk of the Q4 results will start coming out in mid-January, but we will have seen roughly two dozen such November quarter results by that time.

The expectation is that Q4 earnings for the S&P 500 index will decline -11.2% from the same period last year on +0.2% higher revenues. This would follow the severe pandemic driven hit to earnings growth in the first three quarters of the year.

The overall earnings outlook started improving in early July, a trend that still continues, albeit at a moderate pace. The consensus expectation is for a strong rebound in 2021, with total S&P 500 earnings increasing by +21.7% on +7.4% higher revenues. This would follow the -17% decline in 2020 on -3.8% lower revenues. 

We expect the 2021 growth picture to notably improve as go through the first half of the year as the economy absorbs the impact of the vaccination effort, which is about to get underway.

For a detailed look at the evolving earnings picture, please check out our weekly Earnings Trends report >>>> First Look Ahead to the Q4 Earnings Season


BHP Group shares have outperformed the Zacks Mining - Miscellaneous industry over the past three-month period (+18.0% vs. +9.2%). In fact, BHP Group’s iron ore production rose 8% year over year to 66 Mt in first-quarter fiscal 2021 driven by record production at Jimblebar and strong supply chain performance. In fiscal 2021, it expects to produce 244-253 Mt of iron ore.

The Zacks analyst believes that the company’s focus on lowering debt will fuel growth. Efforts to make operations more efficient through smarter technology adoption across the entire value chain will bolster margins. However, the expected decline in global steel demand, as growth in China will be offset by weak demand elsewhere due the impact of the pandemic, remains a major concern.

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

Starbucks shares have outperformed the Zacks Retail - Restaurants industry over the past three-month period (+21.7% vs. +6.7%). The company reported fourth-quarter fiscal 2020 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate. However, both the metrics declined sharply year over year. The company had lost nearly $1.2 billion in sales due to the coronavirus pandemic. Although comps declined in the quarter, it improved sequentially in fourth-quarter.

The Zacks analyst believes that the company has been benefiting from operating fundamentals such as solid global footprint, successful innovations and digital offerings. The company anticipates global comparable sales to increase between 18% and 23% in fiscal 2021. However, high debt and dismal margin remain concerns.

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

Snap shares have outperformed the Zacks Internet - Software industry in the year to date period (+225.5% vs. +104.5%). The Zacks analyst believes that Snap is benefiting from a spike in usage of Snapchat. Strong adoption of Augmented Reality (AR) Lenses, Discover content and Shows is driving user growth. Additionally, Snap’s expanding original show content, as well as new features like Camera Kit, Snap Minis and Bitmoji for Games are expected to boost user engagement.

However, increasing investments in areas such as content, AR-lenses and marketing may hurt profitability in the near term. Moreover, lack of revenue diversification and stiff competition from Facebook are major headwinds. Further, bleak ad-spending environment due coronavirus pandemic is a headwind as advertising forms the mainstay of Snap’s revenues.

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

Other noteworthy reports we are featuring today include Regeneron Pharmaceuticals, Inc. (REGN), Twitter, Inc. (TWTR) and The Bank of New York Mellon Corporation (BK).

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Sheraz Mian

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>>>

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