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3 Tech Giants to Watch in the Busiest Week of Earnings

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U.S. stocks gyrated on Jan 22 but managed to finish in the green last week, mostly banking on encouraging fourth-quarter 2020 results. No doubt, the corporate earnings season is off to a flying start with major names like Netflix, Inc. (NFLX - Free Report) and Morgan Stanley (MS - Free Report) coming up with promising results.

However, there were concerns that the relentless rise in coronavirus cases and record-high hospitalization rates could have hampered corporate profits in the quarter. What’s more, the coronavirus outbreak has increased threats of further government curbs that could derail economic progress and raise risks of a recession. However, the early reports of fourth-quarter earnings suggest that companies, to some extent, have been successful in implementing measures to weather the coronavirus pandemic and register strong quarterly results.

After all, as of Jan 22, 66 S&P 500 members reported results with total earnings rising 0.3% compared to the same period last year on 0.6% higher revenues (read more: Q4 and 2021 Earnings Estimates Keep Going Up).

However, all eyes are on this week’s releases, with majority of the S&P 500 and Dow members poised to report quarterly results. This week’s results will tell whether businesses have been able to withstand the coronavirus onslaught during the last quarter of 2020.

Interestingly, market pundits believe that tech stocks, in particular, have done well and may have witnessed a sales jump amid the pandemic. This is because people’s dependence on tech products and services grew during this period as many continue to work, learn and entertain themselves at home. Lest we forget, the stay-at-home trend has been the new normal as coronavirus cases continued to rise, in fact more than ever, in the last quarter of 2020.

Against this backdrop, it’s prudent to watch out for three big technology-driven companies set to release their quarterly results this week. First on the list is Microsoft Corporation (MSFT - Free Report) , which is due to report fiscal second-quarter results on Jan 26, after market close.

Let’s admit that the economy in the December quarter improved compared to the earlier quarters when the pandemic had struck. Thus, small and mid-sized businesses bumped up outlays on tech initiatives, driving Microsoft’s revenues.

Moreover, a remote-work economy has likely boosted the company’s cloud computing business in the December quarter, lifting Azure’s revenues. In fact, CFO Amy Hood recently said that the company expects December-quarter sales for the Intelligent Cloud segment of healthy $13.55 billion to $13.8 billion, as quoted in a Barron’s article.

Microsoft is thus expected to earn $1.64 a share on revenues of $40.12 billion in the December quarter compared to the year-ago  earnings of $1.51 per share on revenues of $36.91 billion. Notably, commendable earnings results are expected to lift its share price. Thus, Microsoft’s expected earnings growth rate for the current quarter and year is 11.4% and 16.8%, respectively. Microsoft currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

Second on the list is Apple Inc (AAPL - Free Report) , due to report its December-quarter results after the close of trading on Jan 27. The tech behemoth is now projected to earn revenues worth more than $100 billion for the first time ever in a quarter. In Apple’s fiscal first quarter, it started to roll out iPhone 12, particularly from the month of October. The demand for such a 5G-enabled smartphone had been immense and should certainly get reflected in the company’s revenue results.

Thanks to the pandemic, the company witnessed high demand for its Macs and iPads as more people are working and studying from home. Needless to say, the company launched its latest iPad in the latter half of last year. Thus, the company’s earnings for the December quarter is expected at $1.39 a share on revenues of $102.61 billion, suggesting an improvement from the year-ago quarter’s earnings of $1.25 a share on $91.82-billion revenues.

 

The pandemic in no way could impede Apple’s rally in recent times, with the company’s earnings growth for the current quarter and year now expected at 45.3% and 22.9%, respectively. The company at present has a Zacks Rank #2 (Buy).

Lastly, social media giant Facebook Inc (FB - Free Report) is set to report December-quarter results on Jan 27, after the close of trading. It’s worth pointing out that the COVID-19 pandemic, strong negative reaction from Trump supporters and even antitrust lawsuit couldn’t impact the company’s performance in the latter half of last year. And that should surely get reflected in the company’s December-quarter results.

The company, actually, is widely assumed to have performed well in the said quarter, mostly due to an uptick in daily and monthly average users. At the same time, when it comes to advertising, the company has the highest reach compared to any other social media platform. Thus, it is expected to witness an improvement in advertising revenues as well.

Facebook, therefore, is likely to see earnings per share of $3.22 on revenues of $26.26 billion in the December quarter, up from the year-ago earnings of $2.56 a share on $21.08 billion in revenues.

 

Facebook’s projected earnings growth rate for the current quarter and year is 24.6% and 11.8%, respectively. To top it, the company at this time has a Zacks Rank #2.

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