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Zacks Earnings Trends Highlights: Alphabet, Microsoft, Meta, Nvidia and Tesla
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For Immediate Release
Chicago, IL – February 15, 2024– Zacks Director of Research Sheraz Mian says, "Had it not been for the Tech sector's strong growth, the +5.8% earnings growth for the companies that have reported already drops to a decline of -0.1%."
Q4 Results Paint a Positive Earnings Picture
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:
Total Q4 earnings for the 369 S&P 500 members that have reported results are up +5.8% from the same period last year on +3.6% higher revenues, with 79.1% beating EPS estimates and 64.8% beating revenue estimates.
The Tech sector is solely responsible for keeping the Q4 earnings growth pace in the positive territory. Had it not been for the Tech sector's strong growth, the +5.8% earnings growth for the companies that have reported already drops to a decline of -0.1%.
The Tech and Energy sectors are having the opposite effects on the Q4 earnings growth pace, with the Energy sector pulling it down and the Tech sector giving it a boost.
Excluding the 'Magnificent 7' – Apple, Amazon, Alphabet (GOOGL - Free Report) , Microsoft (MSFT - Free Report) , Meta (META - Free Report) , Nvidia (NVDA - Free Report) & Tesla (TSLA - Free Report) – whose Q4 earnings are on track to be up +48.7% on +14.5% higher revenues, total earnings for the rest of the index would down -2.9% on +1.8% higher revenues.
In this space, we have discussed the impressive earnings performance of the Magnificent 7 companies in the ongoing Q4 earnings season and how these strong growth numbers validate these companies' market leadership.
Using estimates for Nvidia, which reports quarterly results on February 21st, with actual results for the other 6 members of the group, total Mag 7 earnings for Q4 are on track to increase +48.7% from the same period last year on +14.5% higher revenues, which would follow the group's +54.2% higher earnings on +12.9% higher revenues in 2023 Q3.
The group is currently expected to achieve +30.4% more earnings in 2024 Q1 on +12.8% higher revenues, with earnings growth in 2024 Q2 expected to be up +18.2%.
The Mag 7 companies combined are on track to account for 22.8% of all S&P 500 earnings in Q4; they account for 29.5% of the index's total market capitalization. Had these 7 stocks been a sector, they would have the second biggest weight in the S&P 500 index, behind the Tech sector, which currently accounts for 37.5%. The Finance sector, which at one time was the biggest sector in the index, currently accounts for 12%.
Importantly, the Mag 7 earnings outlook is steadily improving.
The revisions trend for the broader Tech sector also remains positive, even though the aggregate revisions trend is modestly negative.
Beyond Mag 7, Q4 earnings for the S&P 500 index are currently expected to be up +5.5% above the year-earlier period on +3.2% higher revenues. This would follow the +3.8% increase in index earnings in 2023 Q3 on +2.3% higher revenues.
Given the expected moderation in the U.S. economy's growth trajectory due to the cumulative effects of Fed tightening, these estimates likely need to come down. But the +4.7% revenue growth expectation is hardly aggressive, considering that the U.S. economy produced a nominal GDP growth rate in excess of +6% last year.
The rest of the 2024 earnings growth is coming from margin expansion, with 2024 net margins for the index going up to +12.4% from last year's 11.7%. Embedded in this margin expectation is the view that the inflation cycle has run its course, with easing cost pressures letting net margins return to the 2022 level.
We don't see this margin (or revenue) outlook as unreasonable or out-of-sync with the economic ground reality.
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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.
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Zacks Earnings Trends Highlights: Alphabet, Microsoft, Meta, Nvidia and Tesla
For Immediate Release
Chicago, IL – February 15, 2024– Zacks Director of Research Sheraz Mian says, "Had it not been for the Tech sector's strong growth, the +5.8% earnings growth for the companies that have reported already drops to a decline of -0.1%."
Q4 Results Paint a Positive Earnings Picture
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:
In this space, we have discussed the impressive earnings performance of the Magnificent 7 companies in the ongoing Q4 earnings season and how these strong growth numbers validate these companies' market leadership.
Using estimates for Nvidia, which reports quarterly results on February 21st, with actual results for the other 6 members of the group, total Mag 7 earnings for Q4 are on track to increase +48.7% from the same period last year on +14.5% higher revenues, which would follow the group's +54.2% higher earnings on +12.9% higher revenues in 2023 Q3.
The group is currently expected to achieve +30.4% more earnings in 2024 Q1 on +12.8% higher revenues, with earnings growth in 2024 Q2 expected to be up +18.2%.
The Mag 7 companies combined are on track to account for 22.8% of all S&P 500 earnings in Q4; they account for 29.5% of the index's total market capitalization. Had these 7 stocks been a sector, they would have the second biggest weight in the S&P 500 index, behind the Tech sector, which currently accounts for 37.5%. The Finance sector, which at one time was the biggest sector in the index, currently accounts for 12%.
Importantly, the Mag 7 earnings outlook is steadily improving.
The revisions trend for the broader Tech sector also remains positive, even though the aggregate revisions trend is modestly negative.
Beyond Mag 7, Q4 earnings for the S&P 500 index are currently expected to be up +5.5% above the year-earlier period on +3.2% higher revenues. This would follow the +3.8% increase in index earnings in 2023 Q3 on +2.3% higher revenues.
Given the expected moderation in the U.S. economy's growth trajectory due to the cumulative effects of Fed tightening, these estimates likely need to come down. But the +4.7% revenue growth expectation is hardly aggressive, considering that the U.S. economy produced a nominal GDP growth rate in excess of +6% last year.
The rest of the 2024 earnings growth is coming from margin expansion, with 2024 net margins for the index going up to +12.4% from last year's 11.7%. Embedded in this margin expectation is the view that the inflation cycle has run its course, with easing cost pressures letting net margins return to the 2022 level.
We don't see this margin (or revenue) outlook as unreasonable or out-of-sync with the economic ground reality.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% 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.