The bulk of the third-quarter earnings season is behind us, with 423 S&P 500 members, representing 84.6% of the index’s total market capitalization, having already reported their third-quarter results. Earnings recession now seems to have lost ground to positive growth arriving ahead of schedule. The third quarter can be interpreted as an inflection point where the growth trend is finally shifting from the negative territory to the positive territory.
As of Nov 4, the total earnings for these companies are up 3.6% on a year-over-year basis (72.8% of the companies beat EPS estimates) while total revenue is up 2.4% on a year-over-year basis (55.1% of the companies beat top-line estimates).
Notably, after five consecutive quarters of decline, earnings are finally back in the positive territory and the overall picture is that of improvement.
As per our latest Earnings Preview report, overall third-quarter earnings for S&P 500 companies are anticipated to be up 2.4% (compared to an earlier estimate of a rise of 2.1%) from the year-ago quarter on revenues that are estimated to increase 1.4%.
While solid results from the finance sector buoyed the index higher, sluggish growth from the energy, autos, transportation and technology sectors was a drag.
Coming to the technology sector, 73.8% of the index members have reported their quarterly results with total earnings increasing 5% on 2.5% higher revenues. Notably, 82.2% of the companies have surpassed earnings per share estimates, while 75.6% have beaten revenue estimates.
However, technology earnings growth is expected to remain muted due to disappointing results from Apple (AAPL - Free Report) , which was a big drag this season. Although the iPhone maker beat fourth-quarter 2016 earnings estimates by a penny, its earnings declined 15% on a year-over-year basis on 9.9% decline in revenues.
E-commerce comprises an important component of the technology sector and is anticipated to remain on the earnings growth trajectory in the quarter.
Here we take a look at three e-commerce companies that are set to report earnings on Nov 8:
TripAdvisor Inc. (TRIP - Free Report) is unlikely to beat third-quarter 2016 earnings estimates as it has an unfavorable combination of a Zacks Rank #4 (Sell) and an Earnings ESP of +2.38%. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
This is because, as per our proven model, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to beat earnings. We caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
TripAdvisor is an online travel research company. It offers reviews and advice on hotels, resorts, flights, vacation rentals, vacation packages, travel guides, and lots more.
During the last quarter, the company acquired Citymaps, a social mapping platform that enables travelers to discover places of interests both locally and worldwide. The app also enables users to share their favorite locations with their friends. We note that this is a very smart move by the company to bolster interest among the tourists to visit new places of interest, which translates to more bookings through the website and hence more revenues for the company.
Additionally, TripAdvisor also revamped its homepage so as to make it more user friendly and convenient for the tourists to plan and book tickets on its website.
These developments are likely to have a positive impact on the company’s upcoming earnings release.
However, macroeconomic uncertainty and competition remain concerns and can adversely affect its earnings in the to-be reported quarter.
We note that TripAdvisor’s results compared unfavorably with the Zacks Consensus Estimate in three out of the last four quarters, resulting in an average negative surprise of 2.62%.
Liberty Ventures (LVNTA - Free Report) too is unlikely to beat third-quarter 2016 earnings estimates as it has an unfavorable combination of a Zacks Rank #4 and an Earnings ESP of +211.11%.
Liberty Ventures is primarily focused on business investments. The company owns interests in home shopping television networks and lifestyle and travel services websites.
During the last quarter, the company carried out a management overhaul with an intent to boost growth. Additionally, the company announced quarterly interest payment as well as excess regular cash dividend amount on a certain percentage of senior exchangeable debentures that are due in 2030 and 2043.
While these developments reflect the stable financial position of the company, certain operational and financial risks related to the company’s subsidiaries and business affiliates are a matter of concern ahead of the third-quarter earnings release.
Notably, Liberty Ventures’ results have beaten the Zacks Consensus Estimate in two of the preceding four quarters with an average positive surprise of 373.19%.
Similarly, Wayfair Inc. (W - Free Report) is also unlikely to beat third-quarter 2016 earnings estimates as it has an unfavorable combination of a Zacks Rank #4 and an Earnings ESP of 0.00%.
Wayfair engages in the e-commerce business. It offers bedroom, living room, kitchen and dining, home entertainment, home office, game room and bar, patio, hallway and entryway, and bathroom furniture.
During the last quarter, the company launched Patio Playground, a virtual reality app to enable customers customize their outdoor spaces with décor and furnishings. Additionally, Wayfair owned Joss & Main, a retailer of home décor and furniture, announced its integration with HGTV series Flip or Flop.
While these developments will certainly help the company to popularize its products, growing competition and lack of interest on part of the buyers to shop online for furniture may have some adverse effects on Wayfair’s top line in the to-be reported quarter.
Notably, Wayfair‘s results have beaten the Zacks Consensus Estimate in the preceding four quarters with an average positive surprise of 19.08%.
You can see the complete list of today’s Zacks #1 Rank stocks here.
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