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Zacks Earnings Trends Highlights: Oracle and Adobe
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For Immediate Release
Chicago, IL – March 15, 2024– Zacks Director of Research Sheraz Mian says, "Had it not been for the robust Tech sector earnings growth, total earnings for the rest of the index would be modestly in negative territory."
Tech Sector Resumes Growth Mode
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 S&P 500 earnings for the first quarter of 2024 are expected to be up +2.2% from the same period last year on +3.5% higher revenues. This follows the +6.4% earnings growth on +3.4% higher revenues in 2023 Q4.
As was the case in the preceding two quarters, the Tech sector remains a key growth driver in 2024 Q1. Had it not been for the robust Tech sector earnings growth, total earnings for the rest of the index would be modestly in negative territory.
Half of the 16 Zacks sectors are expected to enjoy positive earnings growth in Q1, with the Tech (earnings growth of +18.5%), Retail (+13.3%), Aerospace (+8.1%), Utilities (+7.3%) sectors enjoying notable year-over-year growth.
Q1 earnings for the remaining 8 Zacks sectors are expected to be below the year-earlier level, with the Energy (decline of -24.8%), Basic Materials (-26.4%), Autos (-24.8%) and Transportation (-14.8%) as the major decliners.
As we look ahead to the 2024 Q1 earnings season, whose early results have already started coming out, it is important to keep in mind where we have been in recent quarters and what is expected for the next few periods.
Earnings growth turned positive in the 2023 Q3 after remaining modestly in negative territory for the three quarters before that period. Two notable developments helped push the aggregate growth picture into positive territory – the Tech sector resumed its traditional growth-driver status, and net margins turned positive.
Expectations for 2024 Q1 and beyond show that the Tech sector is expected to remain a core growth driver, and the margin outlook will continue to improve.
2024 Q1 earnings are expected to increase +2.2% from the same period last year on +3.5% higher revenues.
Please note that the magnitude of negative revisions to Q1 estimates compares favorably to what we had seen in the comparable period for 2023 Q4.
Since the start of Q1, estimates have come down for 10 of the 16 Zacks sectors. The sectors suffering the biggest estimate cuts include Energy, Basic Materials, Transportation, Autos, and Aerospace.
On the positive side, estimates have been raised for 6 of the 16 Zacks sectors since the quarter got underway, with the Retail, Tech, and Utilities sectors enjoying notable positive revisions.
The revisions trend noted here for 2024 Q1 also represents what's happening to full-year 2024 estimates. While estimates in the aggregate are coming down, several major sectors, including the Tech sector, are still enjoying positive estimate revisions.
This favorable earnings outlook for the Tech sector should reassure us all of the fundamental underpinnings of the group's stock-market momentum. One can quibble over the appropriate valuation level for an individual Tech stock, but we can say with a reasonable degree of confidence that the group's stock market momentum should remain in place as long as the revisions trend remains favorable.
For the Tech sector as a whole, 2024 Q1 earnings are expected to be up +18.5% on +7.8% higher revenues. This would follow the sector's +27.4% higher earnings in 2023 Q4 on +8.5% revenue growth.
The strong quarterly results from Oracle (ORCL - Free Report) give us a good start to this reporting cycle for the Tech space. Adobe (ADBE - Free Report) will most likely also confirm these trends in its quarterly report.
Had it not been for the Tech sector's growth, aggregate earnings for the remainder of the S&P 500 index would be modestly in negative territory.
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 +2.9% 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 back to the 2021 level. Embedded in this margin expectation is the view that the inflation cycle has run its course, and the Tech sector will continue to enjoy the benefits of AI and other innovations. 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 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: Oracle and Adobe
For Immediate Release
Chicago, IL – March 15, 2024– Zacks Director of Research Sheraz Mian says, "Had it not been for the robust Tech sector earnings growth, total earnings for the rest of the index would be modestly in negative territory."
Tech Sector Resumes Growth Mode
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:
As we look ahead to the 2024 Q1 earnings season, whose early results have already started coming out, it is important to keep in mind where we have been in recent quarters and what is expected for the next few periods.
Earnings growth turned positive in the 2023 Q3 after remaining modestly in negative territory for the three quarters before that period. Two notable developments helped push the aggregate growth picture into positive territory – the Tech sector resumed its traditional growth-driver status, and net margins turned positive.
Expectations for 2024 Q1 and beyond show that the Tech sector is expected to remain a core growth driver, and the margin outlook will continue to improve.
2024 Q1 earnings are expected to increase +2.2% from the same period last year on +3.5% higher revenues.
Please note that the magnitude of negative revisions to Q1 estimates compares favorably to what we had seen in the comparable period for 2023 Q4.
Since the start of Q1, estimates have come down for 10 of the 16 Zacks sectors. The sectors suffering the biggest estimate cuts include Energy, Basic Materials, Transportation, Autos, and Aerospace.
On the positive side, estimates have been raised for 6 of the 16 Zacks sectors since the quarter got underway, with the Retail, Tech, and Utilities sectors enjoying notable positive revisions.
The revisions trend noted here for 2024 Q1 also represents what's happening to full-year 2024 estimates. While estimates in the aggregate are coming down, several major sectors, including the Tech sector, are still enjoying positive estimate revisions.
This favorable earnings outlook for the Tech sector should reassure us all of the fundamental underpinnings of the group's stock-market momentum. One can quibble over the appropriate valuation level for an individual Tech stock, but we can say with a reasonable degree of confidence that the group's stock market momentum should remain in place as long as the revisions trend remains favorable.
For the Tech sector as a whole, 2024 Q1 earnings are expected to be up +18.5% on +7.8% higher revenues. This would follow the sector's +27.4% higher earnings in 2023 Q4 on +8.5% revenue growth.
The strong quarterly results from Oracle (ORCL - Free Report) give us a good start to this reporting cycle for the Tech space. Adobe (ADBE - Free Report) will most likely also confirm these trends in its quarterly report.
Had it not been for the Tech sector's growth, aggregate earnings for the remainder of the S&P 500 index would be modestly in negative territory.
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 +2.9% 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 back to the 2021 level. Embedded in this margin expectation is the view that the inflation cycle has run its course, and the Tech sector will continue to enjoy the benefits of AI and other innovations. 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.