For Immediate Release
Chicago, IL – April 25, 2022 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Netflix
NFLX
, Apple
AAPL
, Amazon
AMZN
, Alphabet
GOOGL
and Meta Platforms
FB
.
Previewing Tech Earnings After Netflix’s Fiasco
Netflix
remains in the doghouse after coming out with quarterly numbers that have put a question mark over its business model and the outlook for the entire streaming space.
The rude shock from the streaming giant has put the spotlight on other Tech leaders that are on deck to report March-quarter results this week. These include
Apple
and
Amazon
, which report after the market’s close on Thursday (4/28);
Alphabet
reporting after the market’s close on Tuesday (4/26); and
Meta Platforms
reporting after the market’s close on Wednesday (4/27).
Tech stocks were under the gun even before the Netflix bombshell, as sentiment had shifted on the group with the coming Fed policy change. Under this new monetary policy regime of shrinking liquidity and rising interest rates, high growth stocks like those in the Technology sector become less attractive. Or at least that is the perceived wisdom in the market and how these sectors are expected to behave.
In fairness, Netflix doesn’t have a lot in common with the likes of Amazon, Apple or Alphabet. Its first-mover advantage afforded it the opportunity to capture a big slice of the emerging Streaming space, but it never enjoyed the type of moat around its business that Alphabet has in Search or Amazon has in Digital Sales.
The Technology sector is at the bottom of the heap — notwithstanding Netflix’s ‘doghouse’ placement. This is a reflection of the aforementioned sentiment issue with these stocks in a tightening Fed cycle. Second, the Finance sector is leading the Tech sector and also these Tech leaders, as it directly benefits from rising rates.
Revenues remain strong; it is the cost pressures that are weighing on earnings expectations. Needless to add that these Tech leaders are faced with compressed margins.
Whether the growth trend for these large tech 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 Q1 earnings for the Technology sector as a whole are expected to be down -0.3% from the same period last year on +7.5% higher revenues.
This big picture view of the Big 5, as well as the sector as whole, shows a decelerating growth trend. That said, unlike this “quarterly view,” the annual picture shows a lot more stability.
The 2022 Q1 Earnings Season Scorecard
Total Q1 earnings for the 100 S&P 500 members that have reported results through Friday, April 22nd, are down -2.1% from the same period last year on +9.1% higher revenues, with 77% beating EPS estimates and 72% beating revenue estimates.
We get into the heart of the Q1 earnings season next week, with more than 700 companies reporting results, including 176 S&P 500 members. This week’s line-up of reports provide a representative cross section of all sectors, in addition to the Tech leaders.
As we have been pointing out all along, companies are finding it hard to beat consensus estimates the way they had effortlessly been doing in the recent past. In fact, the Q1 beats percentages are the lowest since the second quarter of 2020.
Looking at Q1 as a whole, with actuals for these 100 index members and estimates for the still-to-come companies, total earnings are expected to be up +5.9% on +10.6% higher revenues.
Excluding the -14% decline in Finance sector earnings, the growth rate for the index improves to +12.2%. On the other hand, the Energy sector has a very robust earnings profile at present, with the sector expected to bring in +222.9% more earnings than the year-earlier period on +44.4% higher revenues.
Excluding the hefty Energy sector contribution, earnings for the remainder of the index would be up only +0.3% on +8.1% 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 >>>> Positive Surprises at Covid Lows
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