The bulk of the third-quarter earnings season is behind us with 445 S&P 500 members, representing 89% of the index’s total market capitalization, having already reported their results.
The earnings recession is expected to end in the third quarter with 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 9, total earnings of these companies are up 4% on a year-over-year basis (72.8% of the companies beat EPS estimates) while total revenue is up 2.7% on a year-over-year basis (55.3% 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. Moreover, the proportion of companies beating both the topline and the bottomline estimates are modestly tracking above historical periods.
As per our latest Earnings Outlook report, overall third-quarter earnings for S&P 500 companies are anticipated to be up 3.3% (compared to an earlier estimate of a rise of 2.4%) from the year-ago quarter on revenues that are estimated to increase 1.5%.
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, 87.8% of the index members have reported their quarterly results with total earnings increasing 5.2% on 2.7% higher revenues. Notably, 83.3% of the companies have surpassed earnings estimates, while 75% have beaten revenue estimates.
Internet companies comprise an important component of the technology sector and are anticipated to remain on the earnings growth trajectory in the quarter.
Here we take a look at three Internet companies that are set to report third quarter 2016 results on Nov 14:
Globant S.A. (GLOB - Free Report) is unlikely to beat estimates as it has an unfavorable combination of a Zacks Rank #3 (Hold) and an Earnings ESP of 0.00%.You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
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.
Globant continues to witness stable demand for its digital offerings and the strategic accounts gained traction. However, foreign currency risk remains a matter of concern for the to-be reported quarter.
We note that Globant’s results compared favorably with the Zacks Consensus Estimate in one out of the last four quarters, resulting in an average positive surprise of 1.42%.
VirnetX Holding Corp (VHC - Free Report) too is unlikely to beat estimates as it has an unfavorable combination of a Zacks Rank #3 and an Earnings ESP of 0.00%.
VirnetX is engaged in developing products for real-time communications such as Instant Messaging and Voice over Internet Protocol, commercializing its patent portfolio and providing contract research, prototyping, systems integration and technical services.
During the last quarter, the U.S. District Court for the Eastern District of Texas, Tyler Division, issued a new order in the company's pending litigation against Apple Inc. (AAPL - Free Report) over four patent infringements. We note that the company was awarded $302.4 million in that case.
While such developments are likely to have a positive impact on the company’s earnings, long and unpredictable sale cycles coupled with security breaches remain a matter of concern ahead of the quarterly results.
Notably, VirnetX’s results have missed the Zacks Consensus Estimate in one of the preceding four quarters and it has an average negative surprise of 20.00%.
On the other hand, Amaya Inc. (AYA - Free Report) has got the odds in its favor to post a beat as it has a favorable combination of Earnings ESP of +7.90% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Amaya offers technology-based products and services in the gaming industry. It operates through business-to-consumer and business-to-business segments.
During the last quarter, the company in its response to press speculation stated that it is in discussions for a potential all share merger of equals with William Hill. However, recently, the company announced that no such deal is taking place as of now.
The company’s experienced management coupled with proven strategies to drive profitable growth and shareholder value remain positives for the company. Growing competition in the online sports betting, casino and poker remains a concern in the to-be reported quarter.
Notably, Amaya’s results have beaten the Zacks Consensus Estimate in the preceding four quarters with an average positive surprise of 16.98%.
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