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Internet Stock Earnings Lineup for Oct 29: CDAY, AKAM & More
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The third-quarter 2018 earnings season reflects decelerating revenue surprises compared with the first-half of 2018, per the latest Earnings Preview (Oct 24).
Notably, 139 S&P 500 members or 32.7% of the index’s total market capitalization have come out with their quarterly releases. Total earnings of these companies are up 22% on a year-over-year basis (82% of the companies beat EPS estimates), while total revenues are up 8.7% year over year (62.6% of the companies beat top-line estimates).
Overall third-quarter earnings for S&P 500 companies are anticipated to be up 20% from the year-ago quarter on a revenue increase of 7.2%. Growth is expected to be broad-based, with double-digit earnings improvement expected from 10 of the 16 Zacks Sectors, including Technology.
Technology Continues to Impress
As of Oct 24, companies representing 21.1% of Technology sector’s market capitalization in the S&P index have reported results. Total earnings increased 28.4% on revenue growth of 8.4%.
The sector continues to benefit from strong demand environment for digital transformation. Notably, cloud computing, predictive analysis, artificial intelligence (AI), self-driving vehicles, digital personal assistants and Internet of Things (IoT) have been key drivers in this regard.
Technology sector earnings are expected to improve 16.9% year over year, while revenues are likely to rise 11.5%.
Factors to Drive Internet Growth
Internet stocks form a significant part of the Technology sector. Internet industry participants are benefiting from growing number of Internet users, improving speed & penetration, rapid adoption of 4G Volte technology, increasing demand for videos over the top and proliferation of online retail, among others.
The optimism surrounding the Internet stocks is strongly supported by robust year-to-date performance. Notably, the Invesco NASDAQ Internet ETF (PNQI) and First Trust Dow Jones Internet ETF (FDN) returned 2.6% and 14.4%, respectively, on a year-to-date basis compared with the S&P 500 Composite’s gain of 1.4%.
The Internet stocks are expected to deliver solid performance in the third quarter, due to strong e-commerce growth, expanding online delivery modes and increasing usage of social-media platforms.
Shift in consumer preferences, driven by convenience and easy accessibility, is also expected to keep the momentum of the industry going. Further, the ubiquitous social media has been a key driver behind the strong performance of the Internet stocks. Focus on video streaming has been driving user engagement that is attracting advertising dollars.
Moreover, massive data explosion and real-time analysis of user data supported by Artificial Intelligence (AI) tools are helping advertisers target the right audience, which is boosting their Return on Investment (ROI).
Let’s take a sneak peek into four Internet companies that are set to report quarterly earnings on Oct 29:
Minneapolis-based Ceridian HCM Holding is expected to benefit from an expanding user base and product platform. Strong demand for the company’s payroll and HCM offerings is the key catalyst.
According to the Zacks model, a company with a Zacks Rank #1, 2 or 3 (Hold) has a good chance of beating estimates, if it also has a positive Earnings ESP. Meanwhile, Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.
The Zacks Consensus Estimate for third-quarter revenues is currently pegged at $176.4 million. Moreover, the consensus mark for earnings has been steady at 2 cents over the past seven days.
Meanwhile, Akamai’s (AKAM - Free Report) third-quarter 2018 results are expected to benefit from high level of network traffic on its platform. Moreover, solid demand for Kona Site Defender, Bot Manager and Prolexic Solutions are anticipated to drive Cloud Security Solutions revenues. (Read More: Akamai to Report Q3 Earnings: What's in the Offing?)
However, the Cambridge, MA-based company has an unfavorable combination of a Zacks Rank #3 and an Earnings ESP of -1.21%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Notably, the company’s results surpassed the Zacks Consensus Estimate in all the trailing four quarters, delivering an average positive earnings surprise of 8.1%.
Santa Clara, CA-based Chegg (CHGG - Free Report) is expected to benefit from the rising popularity of online as well as on-demand human help for different courses at high school and college levels. The company’s strategy of delivering high-quality and low-cost educational services is likely to drive Chegg Services revenues in the to-be-reported quarter.
However, Chegg has an unfavorable combination of a Zacks Rank #2 and an Earnings ESP of 0.00%.
The Zacks Consensus Estimate for third-quarter revenues is currently pegged at $69.4 million, reflecting year-over-year growth of 10.8%. Moreover, the consensus mark for earnings has been steady at 3 cents over the past seven days.
In the trailing four quarters, the company delivered an average positive earnings surprise of 25.5%, beating estimates in each.
Charleston, SC-based Blackbaud’s (BLKB - Free Report) third-quarter earnings are expected to be negatively impacted by the continuing business model transition toward subscription-based recurring revenues.
Blackbaud also has an unfavorable combination of a Zacks Rank #5 and an Earnings ESP of 0.00%.
The Zacks Consensus Estimate for third-quarter revenues is currently pegged at $205.6 million, which reflects year-over-year increase of 5.2%. Moreover, the consensus mark for earnings has remained steady at 55 cents in the past seven days.
Notably, the company’s results surpassed the Zacks Consensus Estimate in all the trailing four quarters, delivering an average positive earnings surprise of 5.6%.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Internet Stock Earnings Lineup for Oct 29: CDAY, AKAM & More
The third-quarter 2018 earnings season reflects decelerating revenue surprises compared with the first-half of 2018, per the latest Earnings Preview (Oct 24).
Notably, 139 S&P 500 members or 32.7% of the index’s total market capitalization have come out with their quarterly releases. Total earnings of these companies are up 22% on a year-over-year basis (82% of the companies beat EPS estimates), while total revenues are up 8.7% year over year (62.6% of the companies beat top-line estimates).
Overall third-quarter earnings for S&P 500 companies are anticipated to be up 20% from the year-ago quarter on a revenue increase of 7.2%. Growth is expected to be broad-based, with double-digit earnings improvement expected from 10 of the 16 Zacks Sectors, including Technology.
Technology Continues to Impress
As of Oct 24, companies representing 21.1% of Technology sector’s market capitalization in the S&P index have reported results. Total earnings increased 28.4% on revenue growth of 8.4%.
The sector continues to benefit from strong demand environment for digital transformation. Notably, cloud computing, predictive analysis, artificial intelligence (AI), self-driving vehicles, digital personal assistants and Internet of Things (IoT) have been key drivers in this regard.
Technology sector earnings are expected to improve 16.9% year over year, while revenues are likely to rise 11.5%.
Factors to Drive Internet Growth
Internet stocks form a significant part of the Technology sector. Internet industry participants are benefiting from growing number of Internet users, improving speed & penetration, rapid adoption of 4G Volte technology, increasing demand for videos over the top and proliferation of online retail, among others.
The optimism surrounding the Internet stocks is strongly supported by robust year-to-date performance. Notably, the Invesco NASDAQ Internet ETF (PNQI) and First Trust Dow Jones Internet ETF (FDN) returned 2.6% and 14.4%, respectively, on a year-to-date basis compared with the S&P 500 Composite’s gain of 1.4%.
The Internet stocks are expected to deliver solid performance in the third quarter, due to strong e-commerce growth, expanding online delivery modes and increasing usage of social-media platforms.
Shift in consumer preferences, driven by convenience and easy accessibility, is also expected to keep the momentum of the industry going. Further, the ubiquitous social media has been a key driver behind the strong performance of the Internet stocks. Focus on video streaming has been driving user engagement that is attracting advertising dollars.
Moreover, massive data explosion and real-time analysis of user data supported by Artificial Intelligence (AI) tools are helping advertisers target the right audience, which is boosting their Return on Investment (ROI).
Let’s take a sneak peek into four Internet companies that are set to report quarterly earnings on Oct 29:
Minneapolis-based Ceridian HCM Holding is expected to benefit from an expanding user base and product platform. Strong demand for the company’s payroll and HCM offerings is the key catalyst.
The company is likely to deliver a positive earnings surprise in third-quarter 2018 as it has the favorable combination of an Earnings ESP of +169.24% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Ceridian HCM Holding Inc. Price and EPS Surprise
Ceridian HCM Holding Inc. Price and EPS Surprise | Ceridian HCM Holding Inc. Quote
According to the Zacks model, a company with a Zacks Rank #1, 2 or 3 (Hold) has a good chance of beating estimates, if it also has a positive Earnings ESP. Meanwhile, Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.
The Zacks Consensus Estimate for third-quarter revenues is currently pegged at $176.4 million. Moreover, the consensus mark for earnings has been steady at 2 cents over the past seven days.
Meanwhile, Akamai’s (AKAM - Free Report) third-quarter 2018 results are expected to benefit from high level of network traffic on its platform. Moreover, solid demand for Kona Site Defender, Bot Manager and Prolexic Solutions are anticipated to drive Cloud Security Solutions revenues. (Read More: Akamai to Report Q3 Earnings: What's in the Offing?)
However, the Cambridge, MA-based company has an unfavorable combination of a Zacks Rank #3 and an Earnings ESP of -1.21%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Notably, the company’s results surpassed the Zacks Consensus Estimate in all the trailing four quarters, delivering an average positive earnings surprise of 8.1%.
Akamai Technologies, Inc. Price and EPS Surprise
Akamai Technologies, Inc. Price and EPS Surprise | Akamai Technologies, Inc. Quote
Santa Clara, CA-based Chegg (CHGG - Free Report) is expected to benefit from the rising popularity of online as well as on-demand human help for different courses at high school and college levels. The company’s strategy of delivering high-quality and low-cost educational services is likely to drive Chegg Services revenues in the to-be-reported quarter.
However, Chegg has an unfavorable combination of a Zacks Rank #2 and an Earnings ESP of 0.00%.
The Zacks Consensus Estimate for third-quarter revenues is currently pegged at $69.4 million, reflecting year-over-year growth of 10.8%. Moreover, the consensus mark for earnings has been steady at 3 cents over the past seven days.
Chegg, Inc. Price and EPS Surprise
Chegg, Inc. Price and EPS Surprise | Chegg, Inc. Quote
In the trailing four quarters, the company delivered an average positive earnings surprise of 25.5%, beating estimates in each.
Charleston, SC-based Blackbaud’s (BLKB - Free Report) third-quarter earnings are expected to be negatively impacted by the continuing business model transition toward subscription-based recurring revenues.
Blackbaud also has an unfavorable combination of a Zacks Rank #5 and an Earnings ESP of 0.00%.
The Zacks Consensus Estimate for third-quarter revenues is currently pegged at $205.6 million, which reflects year-over-year increase of 5.2%. Moreover, the consensus mark for earnings has remained steady at 55 cents in the past seven days.
Blackbaud, Inc. Price and EPS Surprise
Blackbaud, Inc. Price and EPS Surprise | Blackbaud, Inc. Quote
Notably, the company’s results surpassed the Zacks Consensus Estimate in all the trailing four quarters, delivering an average positive earnings surprise of 5.6%.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>