Thursday, April 25, 2024

The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features a real-time update on the Q1 earnings, in addition to the usual new research reports on 16 major stocks, including Oracle Corporation (ORCL), HSBC Holdings plc (HSBC) and RTX Corporation (RTX). 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 >>>

Q1 Earnings Season Scorecard

Including this morning's reports from Caterpillar and others, we now have Q1 results from 190 S&P 500 members or 38% of the index's total membership. Total earnings for these companies are up +1.1% from the same period last year on +3.5% higher revenues, with 77.9% beating EPS estimates and 58.9% beating revenue estimates.

The EPS beats percentage of 77.9% compares to 80% for this group of companies in the preceding period and high-low range of 88.9% and 66.3%, with a 5-year average of 79.3%.

The revenue beats percentage of 58.9% for this group of 190 index members compares to 63.2% in the preceding period and the high-low range of the preceding 20 quarters of 86.3% and 58.9%, with an average of 69.1%.

What this means is that at this stage in the Q1 reporting cycle, the revenue beats percentage for this group of 190 companies is at the lowest level in the last 5 years.

Looking at Q1 as a whole, combining the actuals for the 190 companies that have reported with estimates for the still-to-come companies, total earnings are now expected to be up only +2.4% on +3.9% higher revenues.

For the current period (2024 Q2), total S&P 500 earnings are expected to be up +9.6% from the same peirod last year on +4.7% higher revenues.

Estimates have been steadily going up since the quarter got underway, with Energy, Transportation and Finance as among the 7 Zacks sectors enjoying favorable revisions trend since the start of April.

Today's Featured Analyst Reports

Oracle shares have outperformed the Zacks Computer - Software industry over the year-to-date period (+10.2% vs. +6.1%). The company is gaining from the ongoing momentum across its cloud business, driven by the strong uptake of Oracle Cloud Infrastructure and Autonomous Database offerings. The solid adoption of cloud-based applications, comprising NetSuite Enterprise Resource Planning (ERP) and Fusion ERP bodes well.

Oracle’s Gen 2 Cloud is delivering better performance at a lower cost due to high bandwidth and low-latency RDMA networks. ORCL’s continued investment in cloud infrastructure positions it well for sustained growth in the dynamic software industry. The company’s share buybacks and dividend policy are noteworthy.

However, higher spending on product enhancements, especially toward the cloud platform amid increasing competition in the cloud domain, is likely to limit margin expansion.

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

Shares of HSBC have outperformed the Zacks Banks - Foreign industry over the year-to-date period (+7.0% vs. +3.3%). The company’s strong capital position, higher interest rates, an extensive network and business restructuring initiatives will keep aiding it. HSBC’s efforts to improve market share in the Asia region will support financials in the long run, this will likely lead to a rise in near-term expenses. Because of its growth strategy and higher technology-related expenses, HSBC expects 2024 expense growth of 5%.

However, HSBC has already exited retail operations in the United States, Canada, France, New Zealand and Greece and is in the process of fully exiting Russia. In order to focus more on Asia, the company is set to acquire Citigroup’s wealth business in China. The current challenging macroeconomic backdrop is another major near-term headwind.

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

Shares of RTX have outperformed the Zacks Aerospace - Defense industry over the past six months (+29.4% vs. -0.5%). The company ended first-quarter 2024 on a bright note, with both its sales and earnings surpassing their respective consensus estimate. RTX continues to receive ample orders from the Pentagon and its foreign allies for its wide range of combat-proven defense products.

A steadily recovering commercial air traffic is expected to bolster commercial OEM as well as commercial aftermarket sales for the company. RTX holds a solid financial position, which should enable it to make a successful share repurchase.

However, rising crude price tends to put cost pressure on airlines, and operating results of commercial OEM producers like RTX may be impacted. The company might also be affected if China enforces its announced sanctions against RTX’s missile and defense unit.

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

Other noteworthy reports we are featuring today include Eaton Corporation plc (ETN), Marsh & McLennan Companies, Inc. (MMC) and Chipotle Mexican Grill, Inc. (CMG).

Director of Research

Sheraz Mian

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>>>