The second-quarter earnings season is in full swing with over 183 S&P 500 members reporting their results this week. A total of 800 companies are expected to report results this week, including a vast majority of technology companies like Facebook (FB - Free Report) and Amazon.com Inc (AMZN - Free Report) .
As of Jul 21, 2017, we had earnings from 97 members, representing 28.1% of the of the index’s total market capitalization, according to the latest Earnings Preview.
Per the report, total earnings of these companies are up 8.4% on a year-over-year basis, while total revenue is up 5.1%. 78.4% of the companies beat EPS estimates. Meanwhile, almost 72.2% of the companies beat top-line estimates as well.
The trend this earnings season indicates that we will finally see four back-to-back quarters of earnings growth after five straight declines. Total second-quarter earnings for S&P 500 companies are now expected to increase 8.6% year over year, with 4.7% rise in revenues.
Coming to technology, the sector has been a strong performer driven by solid demand for cloud-based platforms, growing adoption of Artificial Intelligence (AI) solutions, Augmented/Virtual reality (AR/VR) devices, autonomous cars, advanced driver assisted systems (ADAS) and Internet of Things (IoT) related software.
According to the report, total earnings of the tech sector are likely to be up 14.8% on 6.1% higher revenues for the first quarter.
Let’s see what’s in store for three internet stocks, all of which are expected to release quarterly numbers on Jul 26.
Facebook Inc is one of the most sought after stocks in the tech space and is slated to report second-quarter 2017 results. The company is unlikely to beat expectations this quarter as it has an unfavorable combination of a Zacks Rank #1 (Strong Buy) 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 per our proven model, a company needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 (Buy) or 3 (Hold) to deliver an earnings surprise. You can see the complete list of today’s Zacks #1 Rank stocks here.
We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
For Facebook, the Zacks Consensus Estimate for the quarter is pegged at $1.13. Last quarter, the company posted a positive earnings surprise of 18.18%. Notably, Facebook has outperformed the Zacks Consensus Estimate over the trailing four quarters, with an average positive surprise of 16.69%. (Read: Facebook to Report Q2 Earnings: What's in the Cards?).
In the past one year, the company’s shares have generated a return of 36.5% compared with the industry’s gain of 23.5%.
F5 Networks, Inc. ((FFIV - Free Report) ) is also unlikely to beat third-quarter fiscal 2017 expectations as it has an Earnings ESP of 0.00% and a Zacks Rank #3. The Zacks Consensus Estimate for the quarter is pegged at $1.59. Last quarter, the company posted a negative earnings surprise of 3.95%. Notably, F5 Networks outperformed the Zacks Consensus Estimate twice while missing the same on two occasions. It has an average positive surprise of 1.17% (read: What's in the Offing for F5 Networks in Q3 Earnings?).
In the past one year, the stock has appreciated just 2.4% against the industry’s gain of 15.6%.
However, the case seems different for PayPal Holdings, Inc. ((PYPL - Free Report) ). The company is likely to beat expectations when it reports second-quarter 2017 results as it has the favorable combination of a Zacks Rank #2 and an Earnings ESP of +3.13%.
The Zacks Consensus Estimate for the quarter is pegged at 32 cents. Last quarter, the company posted a positive earnings surprise of 9.09%. Notably, PayPal has surpassed the Zacks Consensus Estimate twice and has matched the same on two occasions in the trailing four quarters. It has an average positive surprise of 4.13%. (Read: PayPal Gears Up for Q2 Earnings: Is a Beat in Store?)
In the past one year, the stock has appreciated a huge 55.1% against the industry’s rally of 15.6%.
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