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Zacks Earnings Trends Highlights: Microsoft, Alphabet, Amazon, Apple, Meta, Tesla and Nvidia
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For Immediate Release
Chicago, IL – August 8, 2024 – Zacks Director of Research Sheraz Mian says, " The overall picture that has emerged out of the Q2 earnings season is one of stability and an improving earnings outlook, with management teams generally providing a reassuring view of the economic ground reality."
A Closer Look at the Current Earnings Picture
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 overall picture that has emerged out of the Q2 earnings season is one of stability and an improving earnings outlook, with management teams generally providing a reassuring view of the economic ground reality. That said, estimates for the current period have started to weaken faster than we saw in the last two periods.
For the 431 S&P 500 companies that have reported Q2 results, or 86.2% of the index’s total membership, total earnings are up +10.6% from the same period last year on +5.2% higher revenues, with 79.8% beating EPS estimates and 59.2% beating revenue estimates.
For 2024 Q3, total S&P 500 earnings are currently expected to be up +4.7% from the same period last year on +4.7% higher revenues. Estimates for the period have been coming down since the quarter got underway, with the current +4.7% earnings growth pace down from +6.9% in early July.
Q2 earnings for the ‘Magnificent 7’ companies are expected to be up +33.5% from the same period last year on +14.3% higher revenues. Excluding the ‘Mag 7’, Q2 earnings growth for the rest of the index drops to +6.2% (from +11.0%).
The ‘Magnificent 7’ stocks - Microsoft (MSFT - Free Report) , Alphabet (GOOGL - Free Report) , Amazon (AMZN - Free Report) , Apple (AAPL - Free Report) , Meta Platforms (META - Free Report) , Tesla (TSLA - Free Report) and Nvidia (NVDA - Free Report) – have been in the spotlight in the ongoing market turmoil. This followed these companies’ Q2 quarterly releases that mostly failed to impress market participants, particularly the reports from Alphabet, Microsoft, Amazon and Tesla.
As we noted in this space recently, the market’s issue with the Mag 7 companies’ quarterly reports wasn’t so much their current earnings or outlooks for the coming periods but rather with their ever-rising capex levels that are going towards AI projects. Market participants would like to see a clearer monetization path for these AI investments, but management teams have generally been unable to provide that level of visibility.
We don’t see elevated capex by Alphabet, Microsoft, Amazon, or any other Tech operator as an issue. After all, these investments will ensure that these companies remain at the cutting edge of this evolving new business opportunity.
For the Mag 7 group as a whole, we now have Q2 earnings from all but Nvidia, which is scheduled to report on August 28th. For the group as a whole, combining the actual results from the six companies that have reported already with estimates for Nvidia, total Q2 earnings are on track to be up +33.5% on +14.3% higher revenues.
Beyond the Mag 7, Q2 earnings for the Tech sector as a whole are expected to be up +20.6% from the same period last year. The revisions trend for the Tech sector has been positive for a while now, which is important since the sector alone is on track to bring in almost 30% of all S&P 500 earnings over the coming four-quarter period.
For full-year 2024, Tech sector earnings are expected to be up +17.5%, followed by another strong showing expected next year. A big contributing factor to the Tech sector’s positive earnings outlook is the sector’s margins outlook.
We are already in record territory with Tech sector margins, with 2024 margins expected to exceed last year’s record level. The expectation is for some more gains next year and the year after, with the ever-growing share of higher-margin software and services in the overall Tech earnings pie explaining the favorable trend. Part of this likely also reflects optimism about the impact of AI on the sector’s productivity.
The Earnings Big Picture
For the current period (2024 Q3), total S&P 500 earnings are expected to be up +4.7% from the same period last year on +4.7% higher revenues. Estimates have come down since the quarter got underway.
This is a bigger decline to estimates relative to the comparable periods for the two preceding quarters. The negative revisions trend is widespread and not concentrated in one or two sectors, with estimates for 14 of the 16 Zacks sectors getting cut over this period. The Tech and Finance sectors are the only ones enjoying positive estimate revisions over this period.
Please note that this year’s +8.4% earnings growth on only +1.8% top-line gains reflects revenue weakness in the Finance sector. Excluding the Finance sector, the earnings growth pace changes to +8.1%, and the revenue growth rate improves to +4.2%. In other words, about half of this year’s earnings growth comes from revenue growth, with margin gains accounting for the rest.
On the margins front, 11 of the 16 Zacks sectors are expected to have higher margins in 2024 relative to last year, with Tech, Finance, and Consumer Discretionary as the big gainers.
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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: Microsoft, Alphabet, Amazon, Apple, Meta, Tesla and Nvidia
For Immediate Release
Chicago, IL – August 8, 2024 – Zacks Director of Research Sheraz Mian says, " The overall picture that has emerged out of the Q2 earnings season is one of stability and an improving earnings outlook, with management teams generally providing a reassuring view of the economic ground reality."
A Closer Look at the Current Earnings Picture
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 ‘Magnificent 7’ stocks - Microsoft (MSFT - Free Report) , Alphabet (GOOGL - Free Report) , Amazon (AMZN - Free Report) , Apple (AAPL - Free Report) , Meta Platforms (META - Free Report) , Tesla (TSLA - Free Report) and Nvidia (NVDA - Free Report) – have been in the spotlight in the ongoing market turmoil. This followed these companies’ Q2 quarterly releases that mostly failed to impress market participants, particularly the reports from Alphabet, Microsoft, Amazon and Tesla.
As we noted in this space recently, the market’s issue with the Mag 7 companies’ quarterly reports wasn’t so much their current earnings or outlooks for the coming periods but rather with their ever-rising capex levels that are going towards AI projects. Market participants would like to see a clearer monetization path for these AI investments, but management teams have generally been unable to provide that level of visibility.
We don’t see elevated capex by Alphabet, Microsoft, Amazon, or any other Tech operator as an issue. After all, these investments will ensure that these companies remain at the cutting edge of this evolving new business opportunity.
For the Mag 7 group as a whole, we now have Q2 earnings from all but Nvidia, which is scheduled to report on August 28th. For the group as a whole, combining the actual results from the six companies that have reported already with estimates for Nvidia, total Q2 earnings are on track to be up +33.5% on +14.3% higher revenues.
Beyond the Mag 7, Q2 earnings for the Tech sector as a whole are expected to be up +20.6% from the same period last year. The revisions trend for the Tech sector has been positive for a while now, which is important since the sector alone is on track to bring in almost 30% of all S&P 500 earnings over the coming four-quarter period.
For full-year 2024, Tech sector earnings are expected to be up +17.5%, followed by another strong showing expected next year. A big contributing factor to the Tech sector’s positive earnings outlook is the sector’s margins outlook.
We are already in record territory with Tech sector margins, with 2024 margins expected to exceed last year’s record level. The expectation is for some more gains next year and the year after, with the ever-growing share of higher-margin software and services in the overall Tech earnings pie explaining the favorable trend. Part of this likely also reflects optimism about the impact of AI on the sector’s productivity.
The Earnings Big Picture
For the current period (2024 Q3), total S&P 500 earnings are expected to be up +4.7% from the same period last year on +4.7% higher revenues. Estimates have come down since the quarter got underway.
This is a bigger decline to estimates relative to the comparable periods for the two preceding quarters. The negative revisions trend is widespread and not concentrated in one or two sectors, with estimates for 14 of the 16 Zacks sectors getting cut over this period. The Tech and Finance sectors are the only ones enjoying positive estimate revisions over this period.
Please note that this year’s +8.4% earnings growth on only +1.8% top-line gains reflects revenue weakness in the Finance sector. Excluding the Finance sector, the earnings growth pace changes to +8.1%, and the revenue growth rate improves to +4.2%. In other words, about half of this year’s earnings growth comes from revenue growth, with margin gains accounting for the rest.
On the margins front, 11 of the 16 Zacks sectors are expected to have higher margins in 2024 relative to last year, with Tech, Finance, and Consumer Discretionary as the big gainers.
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/performance for information about the performance numbers displayed in this press release.