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Many in the market are looking to the two members of 'the Magnificent 7' who report quarterly results this week to help reverse the stock market's recent weakness.
The immediate catalyst for the stock market pullback appears to be renewed uncertainty about regulatory and trade policies following the November elections, particularly with respect to export restrictions on semiconductor players. That said, we are in a seasonally soft time of the year and should perhaps resist the temptation to read too much into the recent weakness of the Mag 7 stocks, particularly given these stocks' impressive runs already.
Teslais in a league of its own (up +21.3% since July 1st), while Microsoft (down -2.3%) and Alphabet (down -2.2%) are roughly tracking each other.
This pecking order, with Tesla at the top and Amazon and Nvidia at the bottom, is completely reversed when the starting point is changed to the start of 2024 instead of the start of 2024 Q3.
We have Tesla and Alphabet on deck to report Q2 results this week, both reporting after the market's close on Tuesday, July 23rd.
The current Q2 Zacks Consensus EPS for Alphabet of $1.85 has remained unchanged over the last two months, as has Tesla's Q2 EPS estimate of $0.62.
For Alphabet, the Q2 estimates of $1.85 per share on $70.6 billion in revenues represent year-over-year changes of +13.7% and +28.5%, respectively. Tesla's Q2 EPS estimate is -31.9% below the year-earlier period on +0.8% higher revenues.
Both stocks move big on the earnings release, but the EPS surprise isn't always the most important factor behind the stock's post-release reaction. Alphabet shares were up following the last quarterly release on April 25th, with the market appreciating the company's cloud results and AI outlook.
Tesla missed on the top and bottom-lines in the April 23rd quarterly release, but the stock was up following the numbers as the market liked the company's performance on the deliveries front. In fact, Tesla shares have been on a steady uptrend since the April 23rd release, reversing the persistent underperformance of the preceding period.
The other Mag 7 players will report the following week, with Nvidia being the last one to release quarterly results on August 28th.
The group is expected to bring in +25.6% more earnings relative to the same period last year on +13.3% higher revenues.
As we all know by now, the group's phenomenal boost in 2021 partly reflected pulled forward demand from future periods that got primarily adjusted in 2022. The group returned to the 'regular/normal' growth model last year, and the trend is expected to continue this year and beyond.
Beyond these Mag 7 players, total Q2 earnings for the Technology sector as a whole are expected to be up +15.5% from the same period last year on +9.3% higher revenues.
As with the Mag 7, the Tech sector dealt with the pulled-forward revenues but is expected to remain firmly in growth mode.
The Tech sector has enjoyed a favorable revisions trend for the last few quarters, with the Mag 7 stocks leading the rising estimates trend. The current +17.2% earnings growth expected for the group is up from +14.2% three months ago. Estimates for next year have also gone up.
Earnings Season Scorecard and This Week's Earnings Reports
Through all the results that came out on Friday, July 19th, we have seen Q2 results from 71 S&P 500 members, or 14.2% of the index's membership. Total earnings for these 71 index members are up +8.7% from the same period last year on +5.2% higher revenues, with 83.1% beating EPS estimates and only 53.5% able to beat revenue estimates.
The Q2 reporting cycle really ramps up this week, with more than 500 companies on deck to report results, including 135 S&P 500 members. In addition to the aforementioned Alphabet and Tesla, this week's line-up includes a representative cross-section of reports from different sectors, including bellwethers like Verizon and AT&T, UPS, Coke, GM and Ford, Spotify, IBM, Chipotle, and others.
The one notable feature of the above comparison charts is the very low Q2 revenue beats percentage. In fact, 53.5% is a new low for this group of 71 index members over the preceding 20-quarter period (5 years).
The Earnings Big Picture
Looking at Q2 as a whole, combining the actual results that have come out already with estimates for the still-to-come companies, total S&P 500 earnings are expected to be up +9% from the same period last year on +4.8% higher revenues. This will be the highest quarterly growth pace since the +10% earnings growth rate in the 2022 Q1 period.
As we have been flagging all along in this space, we experienced a notably favorable revisions trend ahead of the start of the Q2 earnings season, with estimates for Q2 holding up far better than other recent periods. In the three-month period from the start of the quarter through June 30th, Q2 estimates for the S&P 500 index fell the least relative to the comparable periods of other recent quarters.
Not only is the Q2 earnings growth the highest since the first quarter of 2022, but the absolute level of aggregate earnings for the period is also on track to be a new all-time quarterly record.
Looking at earnings expectations on an annual basis, total 2024 S&P 500 earnings are expected to be up +8.8% on +1.6% revenue growth.
The expected revenue growth pace improves to +3.9% once Finance is excluded from the aggregate data, with the index level aggregate earnings growth for the year declining only to +8.7% on an ex-Finance basis.
For a detailed look at the overall earnings picture, including expectations for the coming periods, please check out our weekly Earnings Trends report >>>> Q2 Earnings Season Starts Positively
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% 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/performancefor information about the performance numbers displayed in this press release.
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Tesla, Microsoft, Alphabet, Amazon and Nvidia are part of Zacks Earnings Preview
For Immediate Release
Chicago, IL – July 22, 2024 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Tesla (TSLA - Free Report) , Microsoft (MSFT - Free Report) , Alphabet (GOOGL - Free Report) , Amazon (AMZN - Free Report) and Nvidia (NVDA - Free Report) .
Big Tech Earnings Loom: What to Expect
Many in the market are looking to the two members of 'the Magnificent 7' who report quarterly results this week to help reverse the stock market's recent weakness.
The immediate catalyst for the stock market pullback appears to be renewed uncertainty about regulatory and trade policies following the November elections, particularly with respect to export restrictions on semiconductor players. That said, we are in a seasonally soft time of the year and should perhaps resist the temptation to read too much into the recent weakness of the Mag 7 stocks, particularly given these stocks' impressive runs already.
Teslais in a league of its own (up +21.3% since July 1st), while Microsoft (down -2.3%) and Alphabet (down -2.2%) are roughly tracking each other.
This pecking order, with Tesla at the top and Amazon and Nvidia at the bottom, is completely reversed when the starting point is changed to the start of 2024 instead of the start of 2024 Q3.
We have Tesla and Alphabet on deck to report Q2 results this week, both reporting after the market's close on Tuesday, July 23rd.
The current Q2 Zacks Consensus EPS for Alphabet of $1.85 has remained unchanged over the last two months, as has Tesla's Q2 EPS estimate of $0.62.
For Alphabet, the Q2 estimates of $1.85 per share on $70.6 billion in revenues represent year-over-year changes of +13.7% and +28.5%, respectively. Tesla's Q2 EPS estimate is -31.9% below the year-earlier period on +0.8% higher revenues.
Both stocks move big on the earnings release, but the EPS surprise isn't always the most important factor behind the stock's post-release reaction. Alphabet shares were up following the last quarterly release on April 25th, with the market appreciating the company's cloud results and AI outlook.
Tesla missed on the top and bottom-lines in the April 23rd quarterly release, but the stock was up following the numbers as the market liked the company's performance on the deliveries front. In fact, Tesla shares have been on a steady uptrend since the April 23rd release, reversing the persistent underperformance of the preceding period.
The other Mag 7 players will report the following week, with Nvidia being the last one to release quarterly results on August 28th.
The group is expected to bring in +25.6% more earnings relative to the same period last year on +13.3% higher revenues.
As we all know by now, the group's phenomenal boost in 2021 partly reflected pulled forward demand from future periods that got primarily adjusted in 2022. The group returned to the 'regular/normal' growth model last year, and the trend is expected to continue this year and beyond.
Beyond these Mag 7 players, total Q2 earnings for the Technology sector as a whole are expected to be up +15.5% from the same period last year on +9.3% higher revenues.
As with the Mag 7, the Tech sector dealt with the pulled-forward revenues but is expected to remain firmly in growth mode.
The Tech sector has enjoyed a favorable revisions trend for the last few quarters, with the Mag 7 stocks leading the rising estimates trend. The current +17.2% earnings growth expected for the group is up from +14.2% three months ago. Estimates for next year have also gone up.
Earnings Season Scorecard and This Week's Earnings Reports
Through all the results that came out on Friday, July 19th, we have seen Q2 results from 71 S&P 500 members, or 14.2% of the index's membership. Total earnings for these 71 index members are up +8.7% from the same period last year on +5.2% higher revenues, with 83.1% beating EPS estimates and only 53.5% able to beat revenue estimates.
The Q2 reporting cycle really ramps up this week, with more than 500 companies on deck to report results, including 135 S&P 500 members. In addition to the aforementioned Alphabet and Tesla, this week's line-up includes a representative cross-section of reports from different sectors, including bellwethers like Verizon and AT&T, UPS, Coke, GM and Ford, Spotify, IBM, Chipotle, and others.
The one notable feature of the above comparison charts is the very low Q2 revenue beats percentage. In fact, 53.5% is a new low for this group of 71 index members over the preceding 20-quarter period (5 years).
The Earnings Big Picture
Looking at Q2 as a whole, combining the actual results that have come out already with estimates for the still-to-come companies, total S&P 500 earnings are expected to be up +9% from the same period last year on +4.8% higher revenues. This will be the highest quarterly growth pace since the +10% earnings growth rate in the 2022 Q1 period.
As we have been flagging all along in this space, we experienced a notably favorable revisions trend ahead of the start of the Q2 earnings season, with estimates for Q2 holding up far better than other recent periods. In the three-month period from the start of the quarter through June 30th, Q2 estimates for the S&P 500 index fell the least relative to the comparable periods of other recent quarters.
Not only is the Q2 earnings growth the highest since the first quarter of 2022, but the absolute level of aggregate earnings for the period is also on track to be a new all-time quarterly record.
Looking at earnings expectations on an annual basis, total 2024 S&P 500 earnings are expected to be up +8.8% on +1.6% revenue growth.
The expected revenue growth pace improves to +3.9% once Finance is excluded from the aggregate data, with the index level aggregate earnings growth for the year declining only to +8.7% on an ex-Finance basis.
For a detailed look at the overall earnings picture, including expectations for the coming periods, please check out our weekly Earnings Trends report >>>> Q2 Earnings Season Starts Positively
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% 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/performancefor information about the performance numbers displayed in this press release.