Tuesday, May 7, 2024

The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features a real-time update on the Q1 earnings season, in addition to updated research reports on 16 major stocks, including Tesla, Inc. (TSLA), Johnson & Johnson (JNJ) and Netflix, Inc. (NFLX). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.

You can see all of today’s research reports here >>>

Q1 Earnings Season Scorecard

Including all of the reports that came out this morning, we now have Q1 results for 426 S&P 500 members or 85.2% of the index's total membership. Total earnings for these companies are up +5.2% from the same period last year on +4.1% higher revenues, with 78.2% beating EPS estimates and 61% beating revenue estimates.

The Q1 EPS beats percentage of 78.2% compares to a 20-quarter average of 77.8% and high-low range of 68.8% and 86.6% for this group of 426 index members. The Q1 revenue beats percentage of 61% compares to a 20-quarter average for this group of 426 index members of 70.1%, with the high-low range of 58.8% and 86.2%.

In other words, positive revenue surprises are on the lower side relative to recent history. The Q1 earnings and revenue growth rates represent an acceleration from what we had been seeing over the last few quarters, with the growth rates imrpoving further when seen on an ex-Energy basis.

Excluding the Energy sector, Q1 earnings growth for the rest of the index would be up +8.4%. If also adjust for the big Brystal Myers one-charge, the Q1 earnings growth improves to +12.1% on +4.7% higher revenues.

Today's Featured Analyst Reports

Shares of Tesla have underperformed the Zacks Automotive - Domestic industry over the year-to-date period (-25.6% vs. -22.7%). The company’s shrinking automotive margins and a slowdown in deliveries amid a cooling electric vehicle (EV) market have been plaguing. Tesla expects its vehicle volume growth rate for 2024 to be noticeably lower than 2023.

With competition intensifying in the EV space, Tesla’s focus on autonomous driving and artificial intelligence (AI) is expected to be a game changer. It aims to launch affordable vehicles, transition into an AI company and is banking on its robotaxi venture. The successful introduction of its Full Self Driving (FSD) software in China amid stiff competition marks a significant win.

Additionally, TSLA’s Energy Generation and Storage business is thriving. While near-term challenges persist, long-term prospects appear promising, driven by its big bet on driverless software and AI in an attempt to revive sales.

(You can read the full research report on Tesla here >>>)

Johnson & Johnson shares have underperformed the Zacks Large Cap Pharmaceuticals industry over the past year (-5.7% vs. +19.4%). The company is witnessing headwinds like generic competition and pricing pressure continue. J&J faces the upcoming patent expiration of Stelara. Though it has taken meaningful steps to resolve its talc and opioid litigation, uncertainty regarding the talc litigations persists.

Nevertheless, J&J’s Innovative Medicine unit is performing at above-market levels. Its growth is being driven by existing products like Darzalex, Stelara, Tremfya and Erleada, and also the continued uptake of new launches, including Spravato, Carvykti and Tecvayli.

The MedTech unit is showing improving trends, driven by a recovery in surgical procedures and contribution from new products. J&J is making rapid progress with its pipeline and line extensions.

(You can read the full research report on Johnson & Johnson here >>>)

Shares of Netflix have outperformed the Zacks Broadcast Radio and Television industry over the year-to-date period (+22.6% vs. +7.4%). The company added 9.33 million paid subscribers globally in first-quarter 2024, with a rise of 1% in average revenue per subscription. The company attributed the robust top-line growth to its paid subscription-sharing offering (part of its password-sharing crackdown), recent price changes and the strength of its business in general.

Netflix is expected to continue dominating the streaming space, courtesy of its diversified content portfolio, which is attributable to heavy investments in the production and distribution of localized and foreign-language content.

However, stiff competition in the streaming space from the likes of Apple, Amazon Prime Video, Disney+, Peacock and Paramount+ is a headwind. NFLX’s leveraged balance sheet and a higher streaming obligation are concerns.

(You can read the full research report on Netflix here >>>)

Other noteworthy reports we are featuring today include Abbott Laboratories (ABT), TotalEnergies SE (TTE) and ConocoPhillips (COP).

Director of Research

Sheraz Mian

Note: Sheraz Mian heads the Zacks Equity Research department and is a well-regarded expert of aggregate earnings. He is frequently quoted in the print and electronic media and publishes the weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here>>>