The second-quarter 2018 reporting cycle has crossed the halfway mark with plenty of positive earnings surprises and momentum on the revenue front.
Per the latest Earnings Preview, total earnings of the 265 S&P 500 members that have reported,, constituting 66.2% of the index, are up 23.6% on a year-over-year basis (80.8% of the companies beat EPS estimates). Total revenues are up 10.1% (72.1% of the companies beat top-line estimates).
Second-quarter earnings of S&P 500 companies are anticipated to be up 23.6% from the year-ago quarter on revenues that are estimated to increase 8.8%.
Notably, the Technology, Finance, Energy, Basic Materials, Industrial Products and Retail sectors are expected to come up with an impressive quarterly performance. The Autos and Conglomerates sectors’ performance might be a tad bit disappointing in this reporting cycle.
Technology Earnings So Far & Expectations
We believe a surge in demand for data centers and cloud-based platforms has aided earnings growth so far. Demand for augmented/virtual reality devices, advanced driver assisted systems (ADAS), Artificial Intelligence (AI) solutions and Internet of Things (IoT) related software also increased, leading to the splendid figures.
Notwithstanding the dismal results of Netflix (NFLX - Free Report) and Facebook (FB - Free Report) , overall results of the space have been impressive. As of Jul 27, earnings reported by S&P 500 technology companies were up 35.3% year over year (90% of the companies beat EPS estimates). Revenues reported by these companies were up 12% from the year-ago quarter (87.1% of the companies beat revenue estimates).
Total earnings of S&P 500 technology companies are expected to increase 30.6% (up from the previous expectation of 28.7%) on a year-over-year basis. Total revenues are anticipated to increase 11.8% (up from the previous expectation of 11.6%).
Our research shows that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP have high chances of beating earnings estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Let’s take a sneak peek into four Internet companies that are set to report quarterly earnings on Aug 1:
Square (SQ - Free Report) is expected to gain from a comprehensive commerce ecosystem, which bolsters its presence in the digital payment space globally. Additionally, Square’s focus on expansion of financial services offering is anticipated to be a significant growth driver backed by increasing demand for payments processing and mobile-commerce services among small businesses worldwide.
The company’s robust product portfolio and continued efforts toward expansion through strategic partnerships and acquisitions are positives. Consequently, its seller base is likely to improve with the growing demand for omni-channel business solutions.
Square stock has gained 89.3% year to date, substantially outperforming the 15.6% gain of the industry it belongs to. Square has a Zacks Rank #3. (Read more: Square's Robust Portfolio is Likely to Aid Q2 Earnings)
HubSpot (HUBS - Free Report) is expected to gain from its inbound marketing and sales software suite, which is gaining wide acceptance. Moreover, the rapid adoption of HubSpot CRM offering is likely to boost top-line growth.
HubSpot’s increasing initiatives in the small and medium business (“SMB”) space bode well. We believe portfolio expansion and collaborations will positively impact second-quarter results. Moreover, integration of its various in-house offerings is likely to improve subscription levels, consequently bolstering the top line.
HubSpot stock has gained 40.4% year to date, substantially outperforming the industry. HubSpot has a Zacks Rank #3. (Read more: Can HubSpot Retain Its Beat Streak in Q2 Earnings?)
LivePerson (LPSN - Free Report) provides mobile and online messaging business solutions. Notably, the company surpassed the Zacks Consensus Estimate just once in the trailing four quarters with an average negative earnings surprise of 50.00%.
LivePerson currently has a Zacks Rank #3 and an Earnings ESP of -33.33%.
The stock has gained 100% year to date against the 1.8% decline of the industry it belongs to.
Shutterstock (SSTK - Free Report) operates as a global marketplace for digital imagery. Notably, the company surpassed the Zacks Consensus Estimate once in the trailing four quarters with an average negative earnings surprise of 10.49%.
Shutterstock currently has a Zacks Rank #3 and an Earnings ESP of -9.49%.
The stock has gained 7.2% year to date against the 7.2% decline of the industry it belongs to.
You can see the complete list of today’s Zacks #1 Rank stocks here.
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