The second-quarter earnings season is underway with results from 87 S&P 500 members or 25.7% of the index’s total market capitalization already out (as of Jul 20).
Per the latest Earnings Preview, total earnings of these index members are up 20.9% year over year on the back of 10.3% higher revenues. Beat ratios are impressive with 86.2% of the companies beating earnings estimates and 77% coming ahead of revenue expectations.
Further, the report suggests that second-quarter earnings for total S&P 500 companies are projected to improve 21% year over year, with total revenues increasing 8.3%.
As far as the technology sector is concerned, earnings are now anticipated to be up 24.5% on 11.4% higher revenues. Notably, it is one of the 11 sectors anticipated to report double-digit earnings growth in the quarter to be reported.
The sector continues to benefit from strong demand environment for digital transformation. Notably, cloud computing, artificial intelligence (AI), self-driving vehicles, digital personal assistants and Internet of Things (IoT) have been key drivers in this regard.
Coming to Electronics, the industry is benefiting from the growing proliferation of devices in every major sector, namely consumer, automobile, industrial, aerospace & defense, and communications.
However, this does not ensure earnings beat for all companies in the space. It should be noted that a company’s earnings outperformance is dependent on the overall business environment as well as management’s ability to implement operating and strategic plans.
What Our Model Says
According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or #3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or #5 (Strong Sell) are best avoided.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Let’s see what’s ahead in store for the following three electronic stocks slated to report on Jul 25.
Amphenol Corporation (APH - Free Report) is likely to beat second-quarter 2018 expectations as it has a favorable combination of a Zacks Rank #3 (Hold) and an Earnings ESP of +0.39%. Results are expected to benefit from organic and inorganic growth across most of its end markets in the quarter. (Read more: What's in Store for Amphenol This Earnings Season?)
Notably, the company has a positive record of earnings surprises in the trailing four quarters, with an average beat of 8.5%.
TE Connectivity Ltd. (TEL - Free Report) , a designer, manufacturer, and seller of connectivity and sensors solutions, has an Earnings ESP +0.24% but carries a Zacks Rank #4.
Nonetheless, we note that TE Connectivity’s results compared favorably with the Zacks Consensus Estimate in the trailing four quarters, resulting in an average positive surprise of 7.54%.
The Zacks Consensus Estimate for fiscal third-quarter 2018 earnings and revenues is pegged at $1.38 and $3.68 billion, respectively. The estimates, when compared with the year-ago quarter’s actual figures, indicate growth of 10.5% for earnings and 9.4% for revenues.
AVX Corporation (AVX - Free Report) , a leading worldwide manufacturer and supplier of a broad line of passive electronic components and related products, will report first-quarter fiscal 2019 results. The company has an Earnings ESP of 0.00% and a Zacks Rank #3, which makes surprise prediction difficult.
Notably, AVX has a mixed record of earning surprises in recent quarters. The company beat the Zacks Consensus Estimate once in the trailing four quarters and matched it twice, with an average positive surprise of 4.31%.
The Zacks Consensus Estimate for earnings and revenues is pegged at 18 cents and $412.4 million, respectively. The estimates, when compared with the year-ago quarter’s actual figures, indicate growth of 24.5% for revenues but a decline of 5.3% for earnings.
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