For Immediate Release
Chicago, IL – October 26, 2020 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Microsoft MSFT, Amazon AMZN, Facebook FB, Alphabet GOOGL and Intel INTC.
Previewing Big Tech Earnings
Technology stocks have lost some of their shine in recent weeks, as some previously ignored groups appear to be finally catching a bid. But Technology still remains the undisputed leader in the market, with the major players in the space still accounting for a big part of the market’s gains since the pandemic.
The performance variance between the Tech sector and the broader index (+27% vs. +7.4%) is very clear, with Microsoft and Amazon doing significantly better.
One can make several arguments about why other groups of stocks should also form part of the market’s leadership team. But it is hard to deny that the prominence of these Tech stocks is grounded in fundamental realities. These major Tech players, along with Facebook, Alphabet and a few others have become even more central and critical to how we live and work in these unusual times. Along the way, these companies have become enormously profitable, which we will see afresh as all five of these come out with Q3 results this week.
These five companies combined now account for 17.4% of the total market capitalization of the S&P 500 index, which is only behind the Technology sector’s weight in the index at 32% and above the other 15 sectors, including Finance at 12.1%.
Take a look at the pandemic affected numbers for the current year for the group and contrast that total earnings for the S&P 500 index are on track to decline -19.5% on -4.5% lower revenues this year. In other words, the market likes the group’s highly visible and far less risky growth profile.
Beyond the big 5 Tech players, total Q3 earnings for the Technology sector as a whole are expected to be down -3.2% from the same period last year on +4.6% higher revenues.
Please note that the Tech sector’s Q3 earnings growth would be +0.9% instead of -3.2% had it not been for the drag from Intel and Apple. Intel had another disappointing quarterly showing on Thursday and we will find out on Thursday October 29th whether Apple’s Q3 results come out.
Q3 Earnings Season Scorecard (as of Friday, October 23rd)
We now have Q3 results from 135 S&P 500 members or 27% of the index’s total membership. Total earnings (or aggregate net income) for these 135 companies are down -15.5% from the same period last year on -5.2% lower revenues, with 85.2% beating EPS estimates and 79.3% beating revenue estimates.
The two sets of comparison charts below put the Q3 results from these 135 index members in a historical context, which should give us a sense how the Q3 earnings season is tracking at this stage relative to other recent periods.
Not only is the pace of declines decelerating, but also a much bigger proportion of companies are beating EPS and revenue estimates.
We get into the heart of the Q3 reporting cycle this week, with almost 900 companies on deck to report results, including 186 S&P 500 members. In addition to the aforementioned Tech companies that are reporting this week, we have a fairly representative cross section of operators from all sectors coming out with results this week, including the big oil companies.
Looking at Q3 as a whole, combining the actual results that have come out with estimates for the still-to-come companies, total earnings for the index are expected to be down -17.3% on -2.2% lower revenues.
The key factor from the market’s standpoint is how estimates for 2020 Q4 evolve as companies report their Q3 results. The trend thus far is positive.
The above annual growth picture approximates to an index ‘EPS’ of $128.80 for 2020, down from $159.95 in 2019 and $159.58 in 2021.
For an in-depth look at the overall earnings picture and expectations for the coming quarters, please check out our weekly Earnings Trends report >>>> Exploring the Improving Q3 Earnings Picture
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