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Zacks Earnings Trends Highlights: Alphabet, Meta and Nvidia
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For Immediate Release
Chicago, IL – March 9, 2023 – Zacks Director of Research Sheraz Mian says, "Total S&P 500 earnings for 2023 Q1 are expected to be down -9% from the same period last year on +1.9% higher revenues. This would follow the -5.8% decline in the preceding period’s earnings (2022 Q4) on +5.5% higher revenues."
Will Tech Sector Earnings Growth Resume in Q1?
Note: The following is an excerpt from this week’sEarnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>
Here are the key points:
Total S&P 500 earnings for 2023 Q1 are expected to be down -9% from the same period last year on +1.9% higher revenues. This would follow the -5.8% decline in the preceding period’s earnings (2022 Q4) on +5.5% higher revenues.
Estimates have come down the most for the Aerospace, Basic Materials, Autos, Consumer Discretionary, Retail, Medical and Transportation sectors. The Utilities sector is the only one that has enjoyed modest positive revisions since the start of January.
While the direction of 2023 Q1 earnings estimates is in-line with the trend we have been seeing over the few quarters, the magnitude of negative revisions is smaller relative to what we had seen in the comparable periods for the preceding two quarters.
Earnings estimates for full-year 2023 have been coming down as well. From their peak in mid-April 2022, the aggregate total for the year has been cut by -12.4% for the index as a whole and -14.5% excluding the Energy sector’s contribution.
The Tech sector has gotten off to a great start in 2023, handily outperforming the S&P 500 index in the year-to-date period. While Tech stocks have lost ground over the last few weeks, the Zacks Tech sector is still up +12.1% in the year-to-date period vs. the +3.9% gain for the market as a whole.
This came after a tough year for the group in 2022 when Tech stocks were big-time losers. The Zacks Tech sector lost -36.2% of its value in calendar year 2022, clearly underperforming the S&P 500 index’s -20.7% decline.
These stocks’ recent positive follow through has a lot to do with the market’s evolving expectations of an end to the Fed’s tightening cycle. Higher interest rates resulting from the hawkish Fed posture are a big headwind for these ‘long-duration’ stocks, a big portion of whose value comes from profitabiltiy in future years.
The onset of monetary policy headwinds last year coincided with the group adjusting to the post-Covid world. As we all know, Tech companies were big beneficiaries of Covid-related disruptions.
The post-Covid adjustment view posits that the 2021 jump in the group’s earnings brought forward profitability from future years. As you can see in the above two charts, the market expects this ‘adjustment’ to last through this year, with ‘regular’ growth resuming next year.
The Tech sector’s earnings outlook has been weighed down by the combined effects of post-Covid adjustment and softening demand as a result of the Fed tightening. The chart below shows how the Tech sector’s 2023 earnings estimates have evolved since the start of last year
As noted earlier, aggregate 2023 earnings estimates for the group have been cut more than -20% since April last year. The magnitude of cuts to some of the major players in the space such Alphabet (GOOGL - Free Report) , Meta (META - Free Report) , Nvidia (NVDA - Free Report) and others is even more pronounced.
The Earnings Big Picture
For the current period (2023 Q1), S&P 500 earnings are currently expected to decline -9% from the same period last year on +1.9% higher revenues.
As has been the case over the few quarters, estimates for 2023 Q1 have been steadily coming down.
Please note that the magnitude of cuts to Q1 estimates is relatively lower compared to what we saw in the comparable periods for the last few quarters.
As noted earlier, the current aggregate earnings total for the index approximates to an index ‘EPS’ of $215.23, down from $242.98 in mid-April, 2022.
Expectations for the Coming Periods
As mentioned earlier, 2023 aggregate earnings estimates on an ex-Energy basis are already down by more than -14% since mid-April 2022. Perhaps we see a bit more downward adjustments to estimates over the coming weeks, after more companies report Q4 results and provide guidance along the lines of what we saw with Microsoft. But we have nevertheless already covered some ground in taking estimates to a fair or appropriate level.
This is particularly so if whatever economic downturn lies ahead proves to be more of the garden variety rather than the last two such events. Recency bias forces us to use the last two economic downturns, which were also among the nastiest in recent history, as our reference points. But we need to be cautious against that natural tendency as the economy’s foundations at present remain unusually strong.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Earnings Trends Highlights: Alphabet, Meta and Nvidia
For Immediate Release
Chicago, IL – March 9, 2023 – Zacks Director of Research Sheraz Mian says, "Total S&P 500 earnings for 2023 Q1 are expected to be down -9% from the same period last year on +1.9% higher revenues. This would follow the -5.8% decline in the preceding period’s earnings (2022 Q4) on +5.5% higher revenues."
Will Tech Sector Earnings Growth Resume in Q1?
Note: The following is an excerpt from this week’sEarnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>
Here are the key points:
The Tech sector has gotten off to a great start in 2023, handily outperforming the S&P 500 index in the year-to-date period. While Tech stocks have lost ground over the last few weeks, the Zacks Tech sector is still up +12.1% in the year-to-date period vs. the +3.9% gain for the market as a whole.
This came after a tough year for the group in 2022 when Tech stocks were big-time losers. The Zacks Tech sector lost -36.2% of its value in calendar year 2022, clearly underperforming the S&P 500 index’s -20.7% decline.
These stocks’ recent positive follow through has a lot to do with the market’s evolving expectations of an end to the Fed’s tightening cycle. Higher interest rates resulting from the hawkish Fed posture are a big headwind for these ‘long-duration’ stocks, a big portion of whose value comes from profitabiltiy in future years.
The onset of monetary policy headwinds last year coincided with the group adjusting to the post-Covid world. As we all know, Tech companies were big beneficiaries of Covid-related disruptions.
The post-Covid adjustment view posits that the 2021 jump in the group’s earnings brought forward profitability from future years. As you can see in the above two charts, the market expects this ‘adjustment’ to last through this year, with ‘regular’ growth resuming next year.
The Tech sector’s earnings outlook has been weighed down by the combined effects of post-Covid adjustment and softening demand as a result of the Fed tightening. The chart below shows how the Tech sector’s 2023 earnings estimates have evolved since the start of last year
As noted earlier, aggregate 2023 earnings estimates for the group have been cut more than -20% since April last year. The magnitude of cuts to some of the major players in the space such Alphabet (GOOGL - Free Report) , Meta (META - Free Report) , Nvidia (NVDA - Free Report) and others is even more pronounced.
The Earnings Big Picture
For the current period (2023 Q1), S&P 500 earnings are currently expected to decline -9% from the same period last year on +1.9% higher revenues.
As has been the case over the few quarters, estimates for 2023 Q1 have been steadily coming down.
Please note that the magnitude of cuts to Q1 estimates is relatively lower compared to what we saw in the comparable periods for the last few quarters.
As noted earlier, the current aggregate earnings total for the index approximates to an index ‘EPS’ of $215.23, down from $242.98 in mid-April, 2022.
Expectations for the Coming Periods
As mentioned earlier, 2023 aggregate earnings estimates on an ex-Energy basis are already down by more than -14% since mid-April 2022. Perhaps we see a bit more downward adjustments to estimates over the coming weeks, after more companies report Q4 results and provide guidance along the lines of what we saw with Microsoft. But we have nevertheless already covered some ground in taking estimates to a fair or appropriate level.
This is particularly so if whatever economic downturn lies ahead proves to be more of the garden variety rather than the last two such events. Recency bias forces us to use the last two economic downturns, which were also among the nastiest in recent history, as our reference points. But we need to be cautious against that natural tendency as the economy’s foundations at present remain unusually strong.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
See Stocks Free >>
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.