For Immediate Release
Chicago, IL – February 7, 2022 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Amazon
AMZN
, Alphabet
GOOGL
, Apple
AAPL
, Facebook
FB
and Microsoft
MSFT
.
Tech Earnings Impress in the Face of Economic Headwinds
It has been fascinating to see the extent to which the 5 largest Tech stocks –
Amazon
,
Alphabet
,
Apple
,
Facebook
and
Microsoft
– have moved in response to their quarterly releases in recent days. While Alphabet and Amazon literally added hundreds of billions of dollars to their market capitalizations in the following day’s trading session, Facebook lost that much after disappointing investors.
These stocks have practically behaved like coiled springs, with the earnings reports helping release them. They are enormously important to the market as a whole, both in terms of their weight in the indexes as well as their earnings contribution.
Combined, these companies account for 22.5% of the S&P 500 index’s market capitalization and are contributing 20% of the index’s total 2021 Q4 earnings. For the quarter, these 5 large companies combined earned $98.6 billion in earnings on $408.6 billion in revenues, representing year-over-year growth rates of +26.7% and +15.3%, respectively.
What we see here is that earnings growth is decelerating in a major way, even if we account for some upward revisions estimates in the coming days.
Revenues remain strong; it is the cost pressures that are weighing on earnings expectations. This is actually the big takeaway from the current earnings picture; companies appear to be struggling to meet a historically high-demand environment.
The sources of struggle are logistical bottlenecks that stopped Apple from selling more iPads and Levi’s from selling more jeans as a result of input shortages, logistical bottlenecks and rising costs. All of this is showing up in compressed margins.
Microsoft, Alphabet and Facebook aren’t as vulnerable to logistical bottlenecks as Apple and Amazon are, but they all have to pay up for those brainy engineers.
In other words, whether the growth trend for these companies is decelerating or not is a function of your holding horizon. These companies are impressive growth engines in the long run.
Beyond the Big 5 Tech players, total Q5 earnings for the Technology sector as a whole are expected to be up +17.9% from the same period last year on +11.3% higher revenues.
Q4 Earnings Season Scorecard
Including all the results that came out through Friday, February 4
th
, we now have Q4 results from 278 S&P 500 members or 55.6% of the index’s total membership. Total earnings (or aggregate net income) for these 278 companies are up +30.2% from the same period last year on +16% lower revenues, with 78.4% beating EPS estimates and the same proportion beating revenue estimates.
Q4 numbers not only represent a growth deceleration from the pace of the first three quarters of the year, but also in terms of the beats percentages, particularly EPS beats percentages.
For the
Technology sector
, we now have Q4 results from 81.6% of the sector’s market capitalization in the S&P 500 index. Total Q4 earnings for these Tech companies are up +18.6% from the same period last year on +10.7% higher revenues, with 87.8% beating EPS estimates and 82.9% beating revenue estimates.
Expectations for Q4 & Beyond
Looking at the quarter as a whole, combining the actual results that have come out with estimates for the still-to-come companies, total Q4 earnings for the S&P 500 index are expected to be up +30.1% from the same period last year on +14.6% higher revenues.
For the current period, total S&P 500 earnings are expected to increase +4.4% from the same period last year on +8.4% higher revenues.
For a detailed look at the overall earnings picture, including expectations for the coming periods, please check out our weekly Earnings Trends report
>>>> A Strong and Resilient Earnings Picture Remains Amid Market Volatility
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