Tuesday, May 2, 2023

The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features a real-time update on the ongoing Q1 earnings season in addition to new research reports on 16 major stocks, including Apple Inc. (AAPL), Microsoft Corporation (MSFT) and Meta Platforms, Inc. (META). 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 this morning's releases, we now have Q1 results from 310 S&P 500 members or 62% of the index's total membership.

Total earnings for these companies are down -2.2% from the same period last year on +3.9% higher revenues, with 78.1% beating EPS estimates and 73.9% beating revenue estimates.

The proportion of these 310 index members beating both EPS and revenue estimates is 61.6%. This 61.6% 'blended' beats percentage compares to 57.4% in 2022 Q4, 54.5% in 2022 Q3, 57.1% in Q2, 63.9% in Q1 and the 5-year average of 59.4%.

Looking at 2023 Q1 as a whole, combining the actuals that have come out with estimates for the still-to-come companies, total S&P 500 earnings are now expected to be down -5.4% on +3.1% higher revenues.

Earnings for the current period (2023 Q2) are currently expected to be down -7.4% from the same period last year on -0.6% lower revenues. This is only modestly down from -7.2% and -0.5% expected at the end of March 2023.

For more details about the Q1 earnings season and evolving expectations for the coming periods, please check out our weekly Earnings Trends report here >>> 2023 Earnings: Good Enough, But Not Great

Featured Analyst Reports

Apple shares have been standout performers this year, with the stock gaining +29.4% vs. +20.3% gain for the Zacks Tech sector and +9% gain for the S&P 500 index. Ahead of the company's March-quarter earnings release after the market's close on Thursday (May 4th), the Zacks analyst sees Apple's revenues to grow year over year. Growing services subscriber base and a strong liquidity position are key catalysts for Apple’s prospects.

However, Apple expects the March quarter’s year-over-year revenue growth to be similar to that of the December quarter due to unfavorable forex. For iPhone, Apple expects the March quarter’s year-over-year revenue growth to accelerate relative to the December quarter’s year-over-year revenue growth.

For Mac and iPad, revenues are expected to decline in double digits on a year-over-year basis due to challenging comparison and macroeconomic headwinds. Services revenue growth is expected to be negatively impacted by challenging macroeconomic conditions, as well as weakness in digital advertising and gaming.

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

Shares of Microsoft have outperformed the Zacks Computer - Software industry over the past six months (+43.4% vs. +37.9%). The company’s third-quarter fiscal 2023 results were driven by improvement in Intelligent Cloud and Productivity and Business Processes, offset in part by a decline in More Personal Computing. Intelligent Cloud revenues increased in the quarter, driven by Azure and other cloud services. Productivity and Business

Processes revenues increased due to the Office 365 Commercial. Continued momentum in the small and medium businesses and frontline worker offerings, as well as gain in revenue per user drove top-line growth. More Personal Computing revenues decreased due to Windows and Devices. Steady performance in Talent Solutions aided LinkedIn revenues.

However, declining gaming revenues and videogame sales were headwinds. Increasing spend on Azure enhancements amid stiff competition in the cloud space from Amazon is likely to dent margins.

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

Shares of Meta Platforms have outperformed the Zacks Internet - Software industry over the past year (+14.7% vs. -14.0%). The company is benefiting from steady user growth across all regions, particularly Asia Pacific. Increased engagement for its products like Instagram, WhatsApp, Messenger, and Facebook has been a major growth driver. Its restructuring plan is expected to reduce expenses driving profitability.

However, challenging macroeconomic conditions is negatively impacting Meta’s advertising revenues. Unfavorable forex, targeting and measurement headwinds due to Apple’s iOS changes are headwinds. Its second-quarter guidance reflects macroeconomic and forex concerns.

The company continues to expect Reality Labs operating losses to increase year-over-year in 2023. Ongoing regulatory developments including upcoming IDPC decision on transatlantic data transfers is expected to weigh down its prospects.

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

Other noteworthy reports we are featuring today include Anheuser-Busch InBev SA/NV (BUD), Diageo plc (DEO) and 3M Company (MMM).

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>>>