For Immediate Release
Chicago, IL – May 4, 2020 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Uber (UBER - Free Report) , Live Nation (LYV - Free Report) , Activision-Blizzard (ATVI - Free Report) , Grub Hub (GRUB - Free Report) and Disney (DIS - Free Report) .
Tech Sector Shows Its Earnings Power
We are past the halfway mark in the Q1 reporting cycle, with results from 277 S&P 500 members, or 55.4% of the index’s total membership out already, as of Friday, May 1st. The flood of earnings releases continues this week, with more than 1,200 companies on deck to come out with results, including 156 S&P 500 members. By the end of this week, we will have seen Q1 results from more than 85% of the index’s total membership.
The results thus far have given us a good sense of the earnings impact of Covid-19 related policies. This week brings in another batch of companies that have either been hit hard by the pandemic or have proved to be relatively immune to its ravages, if not benefiting from it.
Of the social-distancing ‘victims’, this week brings results from Uber, Live Nation and others. On the other hand, many consumers have developed newfound respect for companies like Activision-Blizzard, Grub Hub and others during these tough times and this new reality will show in their Q1 results this week. Others like Disney, also reporting this week, don’t fall neatly into either camp. The launch of the company’s Disney Plus streaming service has given the stock a lot of support during this downturn, but the company’s results on Tuesday, May 5th, will show the full extent of the pandemic’s impact on theme parks, ESPN and the rest of its business.
The fact is that no company is truly immune from the effects of this pandemic, though the impressive results from many Technology players in recent days reminds us all over again why many in the market have been gravitating to these names during the Covid-19 turmoil.
I am totally brushing off the market’s Friday sell off following the Tech results as nothing more than sell-the-news throughout the market recovery in April, as you can see in the year-to-date performance chart below of the S&P 500 index (red line showing -9.5%), Nasdaq Composite (blue line showing -4.4%) and these stocks.
Tech Sector Scorecard
For the Zacks Technology sector, we now have Q1 results from 27 of the sector’s 69 companies in the S&P 500 index. Please note that these 27 Tech companies that have reported already account for 80.8% of the sector’s total market capitalization in the index.
Total Q1 earnings for these Tech companies that have reported are up +6.2% from the same period last year on +4.5% higher revenues, with 74.3% beating EPS estimates and 71.5% beating revenue estimates. The proportion of Tech companies beating both EPS and revenue estimates is 62.9%, which compares to 48.4% for the S&P 500 index as a whole.
We are not suggesting that Tech companies are immune to the pandemic, they are not. But Tech profitability should hold up a lot better than is the case in other spaces.
Q1 Earnings Season Scorecard
As of Friday, May 1st, we have seen Q1 results from 277 S&P 500 members or 55.4% of the index’s total membership. Total earnings or aggregate net income for these 277 index members that have reported already are down -12.6% from the same period last year on +2.1% higher revenues, with 68.6% beating EPS and 63.9% beating revenue estimates.
The Q1 results thus far show the opposing effects that results from the two largest sectors in the S&P 500 index are having on the aggregate growth picture. These two largest sectors are Finance and Technology, with Finance dragging it down and Technology pushing it higher.
Had it not been for the Finance sector drag, Q1 earnings growth for the remaining S&P 500 companies at this stage would have been a lot better, thanks primarily to the aforementioned Technology results.
- Excluding the Finance sector, whose Q1 earnings for the companies that have reported already are down -39.9% on +3.7% higher revenues, earnings for the rest of S&P 500 companies that have reported would be down only -3.3% (vs. down -12.6% with Finance).
Excluding the Technology sector results, earnings for the rest of S&P 500 companies that have reported would be down -18.8% (vs. down -12.6% with Technology).
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