Tuesday, April 16, 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 and new research reports on 16 major stocks, including Mastercard Incorporated (MA), Netflix, Inc. (NFLX) and The Coca-Cola Company (KO). 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 Scorecard

Including all of the reports that came out this morning, we now have Q1 results from 40 S&P 500 members. Total Q1 earnings for these 40 index members are up +10.7% from the same period last year on +4.5% higher revenues, with 82.5% beating EPS estimates and 65% beating revenue estimates.

This is better earnings growth for these 40 index members relative to what we have seen from this group in recent quarters, though the revenue growth pace represents a modest deceleration from other recent periods.

The 82.5% EPS beats percentage for this group of 40 index members compares to 92.5% in 2024 Q4, 87.5% in 2023Q3, 85% in 2023 Q2, 82.5% in 2023 Q1, and a 12-quarter average of 80.4%.

The 65% revenue beats percentage is modestly above the 62.5% beats percentage we saw for this group of 40 index members in the preceding period, but is otherwise tracking below other recent periods as well as the 12-quarter average of 70.9%. In other words, we can say that companies appear to be struggling to beat consensus Q1 estimates.

Looking at Q1 as a whole, combining the actual resutls from these 40 index members with estimates for the still-to-come companies, total earnings are now expected to be up +3.8% from the same period last year on +3.9% higher revenues. For more details our earnings commentary, please check out our weekly Earnings Trends report here >>>2024 Q4 Earnings Season Gets Underway

Today's Featured Research Reports

Mastercard shares have outperformed the Zacks Financial Transaction Services industry over the past year (+24.7% vs. +17.4%). Numerous acquisitions are helping the company to grow addressable markets and drive new revenue streams. The COVID-19 crisis accelerated the adoption of digital and contactless solutions, providing an opportunity for the firm's business to expedite its shift to the digital mode.

Mastercard is well-poised to gain from steady cash-generating abilities. A strong capital position allows it to pursue acquisitions and prudently deploy capital through share buybacks and dividend payments. Mastercard also increased its quarterly dividend to 66 cents per share.

However, steep operating expenses might stress its margins. Also, we expect general and administrative costs to jump almost 11% in 2024. High rebates and incentives may weigh on net revenues. As such, the stock warrants a cautious stance.

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

Shares of Netflix have outperformed the Zacks Broadcast Radio and Television industry over the year-to-date period (+26.4% vs. +8.4%). The company is benefiting from its growing subscriber base, thanks to a robust portfolio. Crackdown on password-sharing and the introduction of paid sharing in more than 100 countries, which represents over 80% of Netflix’s revenue base, is also expected to aid growth. We expect all of these favorable developments reconfirmed following the company's Q1 results after the market's cose on April 18th.

Netflix’s diversified content portfolio, which is attributable to heavy investments in the production and distribution of localized and foreign-language content, has been driving its growth prospects.

However, stiff competition in the streaming space from the likes of Apple, Amazon Prime Video, Disney+, Peacock and Paramount+ is a headwind. Netflix’s leveraged balance sheet and a higher streaming obligation are concerns. Additionally, unfavorable forex is expected to hurt operating income in the first quarter of 2024.

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

Coca-Cola shares have outperformed the Zacks Beverages - Soft drinks industry over the past six months (+9.5% vs. +8.2%). The company continues to witness positive business trends as reflected by its robust surprise history. KO’s sales and earnings beat estimates for the fourth consecutive quarter in fourth-quarter 2023.

Earnings and sales also improved year over year. Strong revenue growth across most of its operating segments aided by improved price/mix and increased concentrate sales boosted the results. It is poised to gain from innovations and accelerating digital investments. It provided an upbeat guidance for 2024.

However, shares of Coca-Cola lagged the industry in the past three months. KO witnesses inflationary cost pressures, related to higher commodity and material costs, as well as higher marketing investments.

(You can read the full research report on Coca-Cola here >>>)

Other noteworthy reports we are featuring today include Berkshire Hathaway Inc. (BRK.B), Medtronic plc (MDT) and CSX Corporation (CSX).

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>>>