This time around, Wall Street expects the first back-to-back earnings decline as trade war concerns and fears of a recession take center stage.
Total Q2 earnings for the S&P 500 Index are expected to decline 1.7% from the same period last year despite 4% higher revenues. This would follow last quarter’s 0.1% earnings decline despite 4.4% higher revenues (read more: 3 Takeaways from Q2 Earnings Results Thus Far).
In fact, results of small-cap companies, with market capitalization between $300 million and $2 billion, are not expected to be as good as that of their blue-chip counterparts. Nonetheless, the 25% U.S. tariff on some goods coming from China and the potential threat of more provided U.S.-China trade talks fail are the primary reasons for the drab earnings projections. Meanwhile, talks between U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin with their Chinese counterparts show little signs of progress.
Meanwhile, a steady rise in wages and strength in the U.S. dollar are widely expected to aggravate margin pressure. It’s worth pointing out that S&P 500 companies now expect Q2 revenue growth to be the weakest since third-quarter 2016.
Amid this gloomy scenario, it’s the big-brand stocks that offer some respite as they boast stable cash flows and have established business models. Needless to say, the value of brands is that they instantly convey information on quality, durability and consistency to consumers. These traits help such stocks draw consumers in any situation, which ultimately boost their profit margins.
Let us, thus, take a look at some of the big brand companies set to beat earnings in one of the busiest earnings stretches this season. It’s worth pointing out that these stocks have a positive Earnings ESP. This is our proprietary methodology for determining stocks that have the best chance to surprise with their next earnings announcement. It provides the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.
Thanks to increase in non-cash payments, Visa Inc. (V - Free Report) is expected to witness upbeat earnings results. In the past few years, its non-cash transaction volumes went up 10% and analysts expect this trend to grow.
Visa continues to benefit from the Visa Europe acquisition, increasing business volumes, investment in digital technology and a solid balance sheet. Analysts, thus, widely expect Visa to report earnings of $1.33 per share in Q3, higher than $1.20 reported a year ago. The company is expected to report earnings results for the quarter ending June 2019 on Jul 23. The Zacks Rank #2 (Buy) company has an Earnings ESP of +0.58%.
To top it, Visa hasn’t missed any analyst’s earnings per share estimate since fourth-quarter 2015, and its share price has outpaced the broader S&P 500 so far this year (+35.8% vs +17.2%).
Last year, Facebook, Inc.’s (FB - Free Report) Q2 earnings results were weak and the social media giant lost more than $120 billion in market cap the following day. Even though the company has recovered since then, it is still facing many hurdles, including government antitrust concerns and controversies related to Libra crypto coin project.
But, the company continues to benefit from increasing mobile ad revenues from Instagram, core Facebook app and Messenger, and initiatives to improve security. Facebook is expected to post $1.90 earnings per share in Q2, higher than $1.74 reported a year ago. The company is expected to report earnings results for the quarter ending June 2019 on Jul 24. The Zacks Rank #2 company has an Earnings ESP of +0.61%.
That said, Facebook’s stock has gained immensely of late. The company has outperformed the broader S&P 500 industry on a year-to-date basis (+51.3% vs +17.2%).
Following a record-breaking Prime Day sales, shares of Amazon.com, Inc. (AMZN - Free Report) almost hit the record price touched in early September 2018. In fact, the e-commerce giant has outdone the broader S&P 500 so far this year (+30.8% vs +17.2%).
Amazon Web Services (AWS), Amazon’s cloud computing platform for individuals, is doing pretty well. AWS Control Tower and AWS Security Hub are now available to customers, while delivery and logistics system continues to benefit Amazon.
Amazon is widely expected to post earnings of $5.29 per share in Q2, higher than $5.07 reported a year ago. The company is expected to report earnings results for the quarter ending June 2019 on Jul 25. The Zacks Rank #1 (Strong Buy) company has an Earnings ESP of +15.56%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Starbucks Corporation’s (SBUX - Free Report) comparable-store sales despite the effects of changes in foreign currencies have been rising at a steady pace. The company has also seen remarkable growth in U.S.-based Starbucks rewards members. In Q2, memberships in the domestic market increased 13.2% on a year-over-year basis to 16.8 million active members. Additionally, the company’s loyalty programs and digital offerings are expected to drive profits in Q3.
Starbucks is projected to record earnings per share of 72 cents in Q3, higher than 62 cents reported a year ago. The company is expected to report earnings results for the quarter ending June 2019 on Jul 25. The Zacks Rank #2 company has an Earnings ESP of +1.08%.
Positive earnings results generally lead to an uptick in the share price. And when it comes to Starbucks, the company’s shares have outperformed the broader S&P 500 on a year-to-date basis (+40.2% vs +17.0%).
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