Today's Must Read
ExxonMobil (XOM) Banks on Guyana Discoveries, Refining Weak
Adobe (ADBE) Rides on Growing Adoption of Cloud Applications
Thursday, March 4, 2021
The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily provides an update on the Q4 earnings season, in addition to featuring new research reports on 16 major stocks, including JPMorgan Chase (JPM), Exxon Mobil (XOM) and Adobe (ADBE). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Earnings Season Update
We saw a significant increase in aggregate 2021 Q1 earnings estimates as the 2020 Q4 earnings season unfolded, which is now close to the end point (only 7 S&P 500 members are still to report Q4 results).
As we have all along been pointing out, the Q4 earnings season turned out to be better than expected, with positive earnings and revenue growth resuming ahead of schedule and favorable management commentary helping estimates for 2021 Q1 and beyond to steadily go up.
Total S&P 500 earnings for 2021 Q1 are now expected to be up +18.5% from the same period year. This is up from +11.7% in mid-December 2020 and +12.6% in early January 2021.
Estimates for full-year 2021 have similarly been going up as well, with full-year 2021 earnings for the index now expected to be up +28.6% on +9% higher revenues. This works out to an index 'EPS' of $167.55 for 2021, up from $130.33 in 2020 and $156.62 in pre-pandemic 2019. For a detailed look at the Q4 earnings season and evolving expectations for the coming periods, please check out our weekly Earnings Trends report >>>>An All-Around Improving Earnings Picture
JPMorgan shares have outperformed the Zacks Major Banks industry over the past year (+34.2% vs. +25.4%), as the stock has responded to the steepening yield curve. The Zacks analyst believes that JPMorgan is better posittioned to comptialize on the improving interest rate backdrop given branch openings in new regions, inorganic expansion strategy and strong mortgage banking business.
Gradual economic recovery amid vaccine breakthroughs will aid. The company’s impressive capital deployments reflect earnings strength and solid balance sheet. These capital deployment actions are likely to enhance shareholder value.
However, the Fed's accommodative policy and near-zero rates are expected to hurt interest income and margins. Additionally, coronavirus-induced economic downturn has hampered business activities, thereby hurting loan demand.
Shares of Exxon Mobil have gained +44.6% in the last six months against the Zacks Integrated International Oil industry’s gain of +33.5%. The Zacks analyst, however, believes that lower refining margin, owing to the coronavirus pandemic, has been hurting the firm’s downstream unit.
Also, owing to huge counter-cyclical capital spending program, which has been affecting its cash flow generation capabilities, the company may need to compromise on its balance sheet strength.
Meanwhile, the company estimates gross recoverable resource of nearly 9 billion oil-equivalent barrels from offshore Guyana discoveries. Moreover, compared to 2019, this energy firm projects annual structural expense savings of $6 billion by 2023, which will aid its bottom line.
Adobe shares have lost -8.9% over the past three months against the Zacks Software industry’s gain of +3.4%. The Zacks analyst believes that Adobe is benefiting from strong demand for its creative products.
The company’s Creative Cloud, Document Cloud and Adobe Experience Cloud products are driving the top-line growth. Further, rising subscription revenues and solid momentum across the mobile apps are major positives.
Additionally, growth in emerging markets, robust online video creation demand and improving average revenue per user are tailwinds. However, lower end-market demand and exposure to Europe remain overhangs. High acquisition expenses do not bode well for its margin expansion.
Other noteworthy reports we are featuring today include Advanced Micro Devices (AMD), Petrobras (PBR) and Canadian Pacific Railway (CP).
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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>>>