Today's Must Read
Berkshire (BRK.B) Poised to Grow on Solid Insurance Business
Investment in Growth Projects to Aid BHP Group (BHP)
Fiftyfive5 Buyout Aid Accenture (ACN) Despite Talent Cost
Tuesday, January 24, 2023
The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily a real-time scorecard of the ongoing Q4 earnings season, in addition to featuring new research reports on 16 major stocks, including Berkshire Hathaway Inc. (BRK.B), BHP Group Limited (BHP) and Accenture plc (ACN). 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 >>>
2022 Q4 Earnings Season Scorecard
Including all the reports that came out this morning, we now have Q4 results from 72 S&P 500 or 14.4% of the index's total membership. Total earnings for these 72 index members are down -7.5% from the same period last year on +7.2% higher revenues, with 68.1% beating EPS estimates and 65.3% beating revenues estimates.
Relative to historical periods, the Q4 beats percentages are on the low side, particularly for EPS beats.
The 68.1% EPS beats percentage for this group of 72 index members compares to 72.2% in the preceding quarter (2022 Q3) and a 20-quarter average of 78.2%. Over the preceding 20-quarter period, the EPS beats percentage for this group of 72 index members has been as high as 88.9% (in 2021 Q2) and as low as 61.1% (2020 Q1).
The beats pecentages on the revenue side are also on the lower side relative to the preceding 20-quarter period, but not as pronounced as with the EPS beats percentages.
This trend of lower beats percentages could change as we go through the remainder of the Q4 reporting cycle. But if it persists, it would indicate that Q4 estimates hadn't fallen as much as was warranted by underlying business conditions.
Since management teams are typically quite adept at anchoring such expectations, one could even argue that the shortfall likely took even management teams by surprise.
We will see how this trend evolves over the remainder of this reporting cycle, but we are not seeing its direct follow through in estimates for the current period (2023 Q1).
S&P 500 earnings for 2023 Q1 are currently expected to be down -4.3% from the same period last year on +2.6% higher revenues. This is down from -4% on January 6th and -2.9% in mid-December 2022.
For complete details about the Q4 earnings season and the evolving earnings picture, please check out our weekly Earnings Trends report >>>> A Good Enough Start to the Q4 Earnings Season
Today's Featured Research Reports
Shares of Berkshire Hathaway have gained +1.0% over the past year against the Zacks Insurance - Property and Casualty industry’s gain of +2.4%. The company which is one of the largest property and casualty insurance companies, continues to have a favorable growth outlook on the back of strategic acquisitions. A strong cash position supports earnings-accretive bolt-on buyouts and indicates the financial flexibility.
Continued insurance business growth fuels increase in float, drive earnings and generates maximum return on equity. The non-insurance businesses are delivering improved results with increased revenues over the past few years. A sturdy capital level provides further impetus.
However, exposure to catastrophe loss induces earnings volatility and also affects the property and casualty underwriting results of Berkshire. Huge capital expenditure remains a headwind for the company.
(You can read the full research report on Birkshire Hathaway here >>>)
BHP Group shares have outperformed the Zacks Mining - Miscellaneous industry over the past year (+8.6% vs. +1.2%). The company’s iron ore production rose 2% year over year to 132 Mt in the first half of fiscal 2023 driven by record levels at Western Australia Iron Ore (WAIO). Its iron ore production guidance for fiscal 2023 is 249-260 Mt, indicating 1% year-over-year growth at the midpoint.
Iron ore prices have gained so far in 2023, as demand is expected to rise following the easing of restrictions in China amid supply concerns. Going forward, iron ore prices are expected to be supported by demand in the automotive sector, infrastructure and housing market. Copper and nickel prices will also be fueled by growing demand for electric vehicles.
BHP’s investment in growth projects with focus on commodities like copper, nickel and potash will aid growth. Its efforts to make operations more efficient through technology adoption will drive earnings.
(You can read the full research report on BHP Group here >>>)
Shares of Accenture have underperformed the Zacks Consulting Services industry over the past year (-16.6% vs. -10.8%). The company is facing pricing pressure due to significant competition from strong companies like Genpact, Cognizant and Infosys, particularly at a time of softening demand as a result of macroeconomic forces. Global presence exposes it to foreign currency exchange rate fluctuations. Buyout-related integration risks continues to remain a concern.
However, Accenture has been steadily gaining traction in its outsourcing and consulting businesses backed by high demand for services that can improve operating efficiencies and save costs. The company has been strategically enhancing its cloud and digital marketing suite through buyouts and partnerships.
The company’s strong operating cash flow has helped it reward its shareholders in the form of dividend payments and share repurchases, and pursue opportunities in areas that show true potential.
(You can read the full research report on Accenture here >>>)
Other noteworthy reports we are featuring today include The Estée Lauder Companies Inc. (EL), EOG Resources, Inc. (EOG) and Archer-Daniels-Midland Company (ADM).
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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