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Alibaba, Cisco, Pepsi, Nvidia and Applied Materials are part of Zacks Earnings Preview

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For Immediate Release

Chicago, IL – February 10, 2020 – releases the list of companies likely to issue earnings surprises. This week’s list includes Alibaba (BABA - Free Report) , Cisco (CSCO - Free Report) , Pepsi (PEP - Free Report) , Nvidia (NVDA - Free Report) and Applied Materials (AMAT - Free Report) .

3 Things to Know About Q4 Earnings Season

We can say with a fair amount of confidence that the Q4 earnings season has turned out to be a good one, with decent momentum on the revenues side and earnings growth on track to turn positive.

We share below the three main takeaways from the results thus far. Please note that through Friday, February 7th, we have seen Q4 results from 323 S&P 500 members or 64.6% of the index’s total membership.

First, momentum on the revenues side: For the 323 index members that have reported already, total earnings and revenues are up +0.3% and +4%, respectively. The proportion of these companies beating EPS and revenue estimates is 72.1% and 67.8%, respectively.

A much bigger proportion of companies are beating top-line estimates, with the EPS beats percentage actually tracking below historical periods. The revenues growth rate doesn’t show the same level momentum, but it has nevertheless help fairly well.

Second, earnings growth on track to turn positive in Q4: As we saw earlier, earnings for the 323 index members that have reported already are up +0.3% from the same period last year. For the quarter as a whole, combining the results that have come out with estimates for the still-to-come companies, Q4 earnings are expected to be up +0.6% on a year-over-year basis.

This is the first time that the blended Q4 earnings growth rate has turned positive this earnings season and would follow the -1.7% decline in S&P 500 earnings in the preceding period (2019 Q3). Please note that the anemic earnings growth pace in 2019 is primarily because of tough comparisons to the 2018 numbers that were boosted by the tax cut legislation. ‘Normal’ growth resumes in the current period (2020 Q1) and accelerates into the back half of the year and beyond.   

Third, current period estimates coming down, with the Coronavirus adding to the typical negative revision that would take place any way. We got off to a good start with respect to estimate revisions for 2020 Q1, but that has clearly reversed in recent days.

It is totally normal for current-period estimates to be coming down as companies release their quarterly results and the magnitude of negative revisions to Q1 estimates still compares favorably to historical periods. But the additional factor this time around is the Coronavirus outbreak that has clear negative earnings implications, as many companies have publicly acknowledged.

But the full extent of the virus outbreak will only become clearer over time. We don’t know at this stage whether the outbreak’s negative impact will be a one quarter phenomenon or it will seep into the following periods as well.

This week’s docket of earnings releases include a number of companies whose results can be expected to be significantly exposed to the outbreak. These include China’s Alibaba and travel operators in the U.S., as well.

Overall, we have more than 430 companies on deck to report results this week, including 66 S&P 500 members. Cisco, Pepsi, Nvidia and Applied Materials are some of the other notable companies reporting results this week.  

Tech Sector Scorecard

We now have Q4 results from 86.1% of the Tech sector’s market capitalization in the S&P 500 index. Total earnings (or aggregate net income) for these Tech companies are up +5.5% from the same period last year on +6.1% higher revenues, with 87.2% beating EPS estimates and an equivalent proportion beating revenue estimates.

This represents a notable improvement in the sector’s earnings performance, as the comparison charts below show.

Q4 Expectations for the S&P 500 Index

Looking at Q4 expectations as a whole, combining the actual results that have come out with estimates for the still-to-come companies, total earnings (or aggregate net income) for the S&P 500 index are expected to be up +0.6% from the same period last year on +4.2% higher revenues.

For an in-depth look at the overall earnings picture and expectations for Q4, please check out our weekly Earnings Trends report >>>> Q4 Earnings Season Scorecard

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