The coronavirus outbreak has had a sector-wide impact. However, the U.S. tech sector has been more resilient compared with other sectors during the coronavirus-hit earnings season.
A solid data-center market, the growing adoption of cloud-based applications as well as the tech-supported remote-working and online-learning wave are working in favor of the industry players, offsetting supply-chain disruptions and lower advertising spending.
The Tech space displayed its flexibility and earnings power through solid performances of leaders like Microsoft (MSFT - Free Report) , Alphabet and Intel. Both Microsoft’s and Alphabet division Google’s results reflected solid demand for cloud-computing services, while Intel’s data-centric businesses drove its first-quarter performance.
Contactless payment and delivery services also gained significant traction amid the coronavirus crisis. PayPal’s (PYPL - Free Report) Venmo, which enables money transfer between family and friends via mobile devices, drove year-over-year growth in total payment volume (TPV). Venmo accounted for more than $31 billion of TPV, surging 48% on a year-over-year basis in first-quarter 2020.
Moreover, online food delivery provider Grubhub witnessed a stellar first quarter as Gross Food Sales and the average order size increased despite the adverse impact of the pandemic on its corporate business.
Additionally, social-media companies, namely Facebook, Snap and Twitter, registered growth in traffic and user engagement as more and more people stayed home due to lockdowns and adherence to shelter-at-home guidelines. Nevertheless, the coronavirus mayhem has affected advertising demand and spending, in turn hurting the industry players’ toplines.
Insight Into Key Releases
Here we discuss five stocks scheduled to release their quarterly earnings this week.
Our proven model predicts an earnings beat for Palo Alto Networks (PANW - Free Report) in third-quarter fiscal 2020. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.
Palo Alto Networks, scheduled to report third-quarter results on May 21, has an Earnings ESP of +5.70% and currently carries a Zacks Rank #3. Notably, the Zacks Consensus Estimate for the company’s quarterly earnings has remained at 91 cents per share over the past 30 days.
Palo Alto Networks’ fiscal third-quarter earnings are likely to have grown on the strong momentum for deal wins, which, in turn, is likely to have driven revenues. The company’s quarterly performance is also anticipated to have gained from the acquisition of Redlock, which forms the basis of the Prisma public cloud, and Demisto, which forms the basis of Cortex.
Moreover, a huge global workforce is working remotely in an effort to contain the spread of coronavirus. However, more people logging into employers' networks means a greater need for security. This trend is likely to have positively impacted demand for the company’s products in the fiscal third quarter. (Read more: Palo Alto to Report Q3 Earnings: What Lies in Store?)
Palo Alto Networks, Inc. Price and EPS Surprise
Intuit (INTU - Free Report) is slated to report third-quarter fiscal 2020 results on May 21. The stock carries a Zacks Rank of 3 and has an Earnings ESP of -9.28%, at present. Further, the consensus mark for the fiscal third-quarter earnings has been lowered by 30 cents over the past 30 days to $5.24 per share.
The company had earlier stated that shift of tax filing deadline to Jul 15 due to disruptions related to the coronavirus pandemic has pushed most of the revenues to the fiscal fourth quarter. Therefore, it had significantly lowered its fiscal third-quarter revenue, operating income, and earnings guidance ranges.
Also, the company anticipates most of its customers with complex returns to start filing toward the deadline, which might result in an approximately 15% year-over-year decline in Consumer Group revenues in the fiscal third quarter. (Read more: Intuit to Report Q3 Earnings: What's in the Cards?)
Intuit Inc. Price and EPS Surprise
Hewlett Packard Enterprise (HPE - Free Report) will report second-quarter fiscal 2020 results on May 21. The company has an unimpressive combination of a Zacks Rank of 4 and an Earnings ESP of 0.00%. Further, the consensus mark for the fiscal second-quarter earnings has been unrevised at 32 cents per share over the past 30 days.
Supply-chain disruptions caused by the coronavirus outbreak in China are expected to have adversely impacted Hewlett Packard’s fiscal second-quarter performance. Notably, China is a key market for the company, and the aforementioned factors might have significantly dampened Hewlett Packard’s server sales in the country.
Furthermore, organizations are pushing back their big and expensive technology products due to a slowdown in global economic growth, which is a major downside for the fiscal second quarter. (Read more: Hewlett Packard to Post Q2 Earnings: What's in Store?)
Hewlett Packard Enterprise Company Price and EPS Surprise
Synopsys (SNPS - Free Report) will report second-quarter fiscal 2020 results on May 20. The stock carries a Zacks Rank #2 and has an Earnings ESP of -0.68%, a combination which dims the possibilities of a beat. The consensus mark for fiscal second-quarter earnings has remained at 99 cents per share in the past 30 days.
Synopsys’ fiscal second-quarter performance is likely to have benefited from growing demand for its solid product portfolio. Widespread contract wins and the growing deployment of Fusion Platform, including Fusion Compiler, are anticipated to have been key drivers. Moreover, the company’s performance is likely to have gained from growth in Custom Compiler, fueled by large deal wins in the 5G, AI and server chip markets.
Nonetheless, the company had earlier stated that sales of its hardware and IP products are tilted more toward the second half of fiscal 2020, thereby adverse impacting fiscal second-quarter performance. Additionally, supply-chain and logistic disruptions due to the coronavirus-led global lockdown might have thwarted the company’s quarterly performance. (Read more: Synopsys to Report Q2 Earnings: What's in the Offing?)
Synopsys, Inc. Price and EPS Surprise
Splunk Inc. (SPLK - Free Report) will report first-quarter fiscal 2021 numbers on May 21. The company has an unimpressive combination of a Zacks Rank of 4 and an Earnings ESP of 0.00%. Further, the consensus mark for loss in the fiscal first quarter has been steady at 56 cents per share over the past 30 days.
Solid demand for the company’s enterprise, security and cloud solutions is expected to have driven the top line in the to-be-reported quarter. Additionally, Splunk’s solid partner base, comprising the likes of Amazon Web Services, Accenture, and Cisco, has been a key catalyst.
Also, Splunk has been transitioning to a renewable model, which is expected to have driven the top line. However, the transition is expected to have affected the operating cash flow. Additionally, increasing cloud revenues in the product mix are expected to have strained margins in the quarter under review. (Read more: Factors Setting the Tone for Splunk's Q1 Earnings)
Splunk Inc. Price and EPS Surprise
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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