We are at the tail end of the Q2 earnings season, with only about 16% of the S&P 500 members yet to report. This week’s lineup includes 35 index members including big names such as NVIDIA, Disney and Macy’s.
Picture Emerging Thus Far
Per the Earnings Preview, as of Aug 4, 420 S&P 500 members, representing 86.7% of the index’s total market capitalization, have already reported quarterly numbers. Total earnings of these companies are up 11.6% on a year-over-year basis (74.3% of the companies beat EPS estimates) while total revenue is up 5.6% on a year-over-year basis (68.3% of the companies beat top-line estimates).
Overall, second-quarter earnings for the index members are anticipated to be up 10% from the year-ago quarter on revenues that are estimated to increase 5.1%.
Technology Earnings Soar
We note that almost 86.2% of the total market capitalization in the technology sector has reported till now. Total earnings are up 16.5% on a year-over-year basis (82.6% of the companies beat EPS estimates) while total revenue is up 7.6% on a year-over-year basis (87% of the companies beat top-line estimates).
Technology is one of the three sectors that have contributed significantly to second-quarter earnings. The other two are Finance and Energy.
This sector has been a strong performer on a year-to-date basis. The sector is benefiting from increasing demand for cloud-based platforms, growing adoption of Artificial Intelligence (AI) solutions, Augmented/Virtual reality devices, autonomous cars, advanced driver assisted systems (ADAS) and Internet of Things (IoT) related software.
Stocks to Watch This Week
Let’s take a sneak peek into three e-commerce companies that are set to report their quarterly earnings on Aug 8:
The Priceline Group Inc. (PCLN - Free Report) , a leading player in the highly fragmented online travel booking market, looks likely to beat second-quarter 2017 estimates as it has a favorable combination of a Zacks Rank #3 (Hold) and an Earnings ESP of +2.31%. 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 to beat earnings. 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.
Interestingly, Priceline’s results compared favorably with the Zacks Consensus Estimate in each of the last four quarters with an average positive surprise of 10.3%.
The U.S. Commerce Department estimates international travel to the U.S. to witness CAGR of 3.3% from 2016 to 2021. Inbound travel volumes from Mexico, China, Canada, India and South Korea will be the highest during this period. Visitor volume in 2017 is expected to be up 2.4% from 2016. Since it is a major international player, these trends play into Priceline’s sweet spot and will have an impact on its quarterly performance. (See More: Is a Beat in Store for Priceline in Q2 Earnings?)
Year-to-date, Priceline has outperformed the industry it belongs to. While the industry gained 47.5%, the stock returned 38.7% over the same time frame.
Online travel research company TripAdvisor, Inc. (TRIP - Free Report) , on the other hand, is unlikely to beat second-quarter 2017 estimates as it has an unfavorable combination of a Zacks Rank #3 and Earnings ESP of -15.79%.
TripAdvisor has a very unimpressive surprise history as well. It missed estimates all the last four quarters with an average negative surprise of 22.5%.
TripAdvisor has lost 14.8% of its value year to date against 47.5% growth of its industry.
Similarly, e-commerce company Wayfair Inc.’s (W - Free Report) Earnings ESP of 0.00% and Zacks Rank #3 decreases its odds of an earnings surprise when it reports second-quarter 2017.
Wayfair’s track record, however, has been quite impressive, with the company comfortably beating estimates in each of the trailing four quarters, at an average of 13.5%.
Shares of Wayfair have gained a massive 129.3% year to date, significantly outperforming the industry’s 47.5% rally.
Liberty Ventures (LVNTA - Free Report) is also unlikely to beat second-quarter 2017 estimates as it has an unfavorable combination of a Zacks Rank #3 and Earnings ESP of 0.00%.
Liberty’s track record, however, has been impressive, with the company beating estimates in each of the trailing four quarters, at an average of 1373.8%.
Shares of Liberty have gained 61.2% year to date, outperforming the industry’s 47.5% rally.
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