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Research Daily

Sheraz Mian

Earnings Season Scorecard and Research Reports for Microsoft, Morgan Stanley & Honeywell


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Thursday, July 29, 2021

The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features a real-time scorecard of the Q2 earnings season and new research reports on 16 major stocks, including Microsoft Corporation (MSFT), Morgan Stanley (MS), and Honeywell International Inc. (HON). These research reports 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 >>>

Q2 Earnings Season Scorecard

Including all of this morning's earnings releases, we now have Q2 results from 255 S&P 500 members or 55.1% of the index's total membership. Please note that these 255 index members account for 64.1% of the index's total market capitalization.

Total Q2 earnings for these 255 index members are up +96.8% from the same period last year on +23.8% higher revenues, with 91%  beating EPS estimates and 87.1% beating revenue estimates. Any way you look at these numbers, they are impressive, with the momentum on the revenue side particularly notable.

Looking at Q2 as a whole, combining the actual results for the 255 companies that have reported with estimates for the still-to-come companies, total Q2 earnings are expected to be up +86.7% on +21.9% higher revenues.

While easy comparisons to the year-earlier period that was badly affected by the Covid lockdowns is a big contributor to the outsized growth rate, but it is not the only reason. Please note that Q2 earnings would be up an impressive +26.4% from the pre-Covid 2019 Q2 period as well.

Also, 2021 Q2 earnings are on track to reach a new all-time quarterly record. Estimates for the current period (2021 Q3) are steadily going up as well, with the current expected earnings growth rate of +25.4% up from +22% on June 30th and +13.5% at the start of the year. For a more detailed look at the Q2 earnings season and expectations for the coming periods, please check out our weekly Earnings Trends report >>>>The Tech Sector's Enormous Earnings Power

Today's Featured Reseach Reports

Shares of Microsoft have outperformed the S&P 500 over the past year (+41.7% vs. +40%). The Zacks analyst believes that the enterprise refresh cycle, new subscription model, Azure and strength in Teams and Gaming segment will continue to generate sizeable cash flows for the company.

A recovering ad as well as job market scenario has been boosting LinkedIn and Search revenues. The company is also witnessing growth in user base of Microsoft 365 suite and Dynamics. Microsoft, however, expects Surface revenues to decline in the fiscal first quarter mainly due to supply chain disruptions. Increasing costs due to Azure enhancements and stiff competition in the cloud space are likely to weigh on margins.

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

Morgan Stanley shares have gained +42.5% over the last six months against the Zacks Investment Banking industry’s gain of +30.5%. The Zacks analyst believes that Morgan Stanley’s opportunistic buyouts is likely to keep supporting growth.

The company has been making efforts to focus less on capital markets driven revenue sources, and the acquisitions of Eaton Vance and E*Trade Financial are a step in this direction. Increasing focus on corporate lending will also continue to support its financials. Elevated expenses due to heavy franchise investments are likely to hurt the bottom line though.

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

Shares of Honeywell have gained +4.8% in the last three months against the Zacks Diversified Operations industry’s gain of +6.3%, however, strong cash flows allow it to deploy capital for making acquisitions and paying out dividends. The Zacks analyst believes that the company is set to benefit from strength in warehouse and workflow solutions business.

Solid demand for personal protective equipment and a strong backlog will act as tailwinds for the company. Weakness across the defense and space business is likely to weigh on its near-term results. High debt levels are expected to increase its financial obligations and hurt profitability. The company is also susceptible to political, economic and geopolitical risks.

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

Other noteworthy reports we are featuring today include Advanced Micro Devices, Inc. (AMD), Intuitive Surgical, Inc. (ISRG) and ConocoPhillips (COP).

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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