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Zacks Earnings Trends Highlights: Amazon, Microsoft and Alphabet
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For Immediate Release
Chicago, IL – February 16, 2023– Zacks Director of Research Sheraz Mian says, "For Q1, S&P 500 earnings are currently expected to be down -8.3% on +2.1% higher revenues. This is down from -4% on January 6th and -2.9% in mid-December 2022."
Making Sense of Earnings Estimate Revisions for Q1 and Beyond
Note: The following is an excerpt from this week's Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>
Here are the key points:
For the 370 S&P 500 companies that have reported Q4 results, total earnings are down -5.8% from the same period last year on +5.6% higher revenues, with 70.8% beating EPS estimates and the same proportion beating revenue estimates.
Looking at 2022 Q4 as a whole, aggregate S&P 500 earnings are currently expected to be down -5.5% on +5.4% higher revenues. Excluding the Energy sector's strong contribution, Q4 earnings for the rest of the index are expected to be down -9.4% on +4.4% higher revenues.
For 2023 Q1, S&P 500 earnings are currently expected to be down -8.3% on +2.1% higher revenues. This is down from -4% on January 6th and -2.9% in mid-December 2022.
Looking at the calendar-year picture, total S&P 500 earnings are on track to be up +4.0% in 2022 and are expected to dip -0.2% in 2023. On an ex-Energy basis, total 2022 index earnings would be down -2.7% (instead of +4.0%, with Energy) while 2023 earnings would be up +1.7% (instead of down -0.2%).
The Q4 earnings season continues to show that while growth is moderating and decelerating, it isn't falling off the cliff that many feared could be in store for us.
The growth challenge is widespread across most sectors, but it is most pronounced in the Tech sector where a combination of cyclical forces and post-Covid normalization is dragging growth down.
Even parts of the Tech space that are enjoying secular growth momentum are starting to show notable deceleration in growth. We have cited the example of cloud computing where even leaders in the space like Amazon (AMZN - Free Report) , Microsoft (MSFT - Free Report) and Alphabet (GOOGL - Free Report) are experiencing moderating growth.
This is a logical extension of the cumulative effects of Fed's extraordinary monetary policy since March 2022 that many in the market hope is getting close to the finish line.
Businesses and households are starting to rein in their spending plans and a number of high-profile companies have announced major layoffs. The labor market still remains strong, helping support households' purchasing power. But the overall operating landscape has become difficult for all companies. This puts a premium on management's abilities to execute in a tough environment.
Beyond the Fed's role in the macroeconomic slowdown is the post-Covid adjustment in a number of important slices of the economy. One such example of ongoing adjustments is in the semiconductor space where companies struggled to meet surging demand over the last two years and are now faced with over-supplied markets that aren't expected to start easing till at least through the back half of the year.
As noted in this space before, GDP growth estimates for the current and coming quarters have been steadily coming down, with full-year 2023 GDP growth now barely in positive territory.
We have been pointing out for a while now how estimates for this year have been steadily coming down for months now, in anticipation of this macroeconomic development.
As noted earlier, the current aggregate earnings total for the index approximates to an index 'EPS' of $215.97, a hair above last week's $216.37, but down from $242.98 in mid-April, 2022.
The Overall Earnings Picture
Earnings this year are now expected to be down -0.2%. This can hardly be called out-of-sync with a flat or even modestly down economic growth outlook. Don't forget that headline GDP growth numbers are in real or inflation-adjusted terms while S&P 500 earnings discussed here are not.
As mentioned earlier, 2023 aggregate earnings estimates on an ex-Energy basis are already down by almost -14% since mid-April 2022. Perhaps we see a bit more downward adjustments to estimates over the coming weeks, after more companies report Q4 results and provide guidance along the lines of what we saw with Microsoft. But we have nevertheless already covered some ground in taking estimates to a fair or appropriate level.
This is particularly so if whatever economic downturn lies ahead proves to be more of the garden variety rather than the last two such events. Recency bias forces us to use the last two economic downturns, which were also among the nastiest in recent history, as our reference points. But we need to be cautious against that natural tendency as the economy's foundations at present remain unusually strong.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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Zacks Earnings Trends Highlights: Amazon, Microsoft and Alphabet
For Immediate Release
Chicago, IL – February 16, 2023– Zacks Director of Research Sheraz Mian says, "For Q1, S&P 500 earnings are currently expected to be down -8.3% on +2.1% higher revenues. This is down from -4% on January 6th and -2.9% in mid-December 2022."
Making Sense of Earnings Estimate Revisions for Q1 and Beyond
Note: The following is an excerpt from this week's Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>
Here are the key points:
The Q4 earnings season continues to show that while growth is moderating and decelerating, it isn't falling off the cliff that many feared could be in store for us.
The growth challenge is widespread across most sectors, but it is most pronounced in the Tech sector where a combination of cyclical forces and post-Covid normalization is dragging growth down.
Even parts of the Tech space that are enjoying secular growth momentum are starting to show notable deceleration in growth. We have cited the example of cloud computing where even leaders in the space like Amazon (AMZN - Free Report) , Microsoft (MSFT - Free Report) and Alphabet (GOOGL - Free Report) are experiencing moderating growth.
This is a logical extension of the cumulative effects of Fed's extraordinary monetary policy since March 2022 that many in the market hope is getting close to the finish line.
Businesses and households are starting to rein in their spending plans and a number of high-profile companies have announced major layoffs. The labor market still remains strong, helping support households' purchasing power. But the overall operating landscape has become difficult for all companies. This puts a premium on management's abilities to execute in a tough environment.
Beyond the Fed's role in the macroeconomic slowdown is the post-Covid adjustment in a number of important slices of the economy. One such example of ongoing adjustments is in the semiconductor space where companies struggled to meet surging demand over the last two years and are now faced with over-supplied markets that aren't expected to start easing till at least through the back half of the year.
As noted in this space before, GDP growth estimates for the current and coming quarters have been steadily coming down, with full-year 2023 GDP growth now barely in positive territory.
We have been pointing out for a while now how estimates for this year have been steadily coming down for months now, in anticipation of this macroeconomic development.
As noted earlier, the current aggregate earnings total for the index approximates to an index 'EPS' of $215.97, a hair above last week's $216.37, but down from $242.98 in mid-April, 2022.
The Overall Earnings Picture
Earnings this year are now expected to be down -0.2%. This can hardly be called out-of-sync with a flat or even modestly down economic growth outlook. Don't forget that headline GDP growth numbers are in real or inflation-adjusted terms while S&P 500 earnings discussed here are not.
As mentioned earlier, 2023 aggregate earnings estimates on an ex-Energy basis are already down by almost -14% since mid-April 2022. Perhaps we see a bit more downward adjustments to estimates over the coming weeks, after more companies report Q4 results and provide guidance along the lines of what we saw with Microsoft. But we have nevertheless already covered some ground in taking estimates to a fair or appropriate level.
This is particularly so if whatever economic downturn lies ahead proves to be more of the garden variety rather than the last two such events. Recency bias forces us to use the last two economic downturns, which were also among the nastiest in recent history, as our reference points. But we need to be cautious against that natural tendency as the economy's foundations at present remain unusually strong.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
See Stocks Free >>
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.