The bulk of the third-quarter earnings season is behind us with 423 S&P 500 members, representing 84.6% of the index’s total market capitalization, having already reported their results.
Earnings recession now seems to have lost ground to positive growth arriving ahead of schedule. The third quarter can be interpreted as an inflection point where the growth trend is finally shifting from the negative territory to the positive territory.
As of Nov 4, total earnings of these companies are up 3.6% on a year-over-year basis (72.8% of the companies beat EPS estimates) while total revenue is up 2.4% on a year-over-year basis (55.1% of the companies beat top-line estimates).
Notably, after five consecutive quarters of decline, earnings are finally back in the positive territory and the overall picture is that of improvement.
As per our latest Earnings Preview report, overall third-quarter earnings for S&P 500 companies are anticipated to be up 2.4% (compared to an earlier estimate of a rise of 2.1%) from the year-ago quarter on revenues that are estimated to increase 1.4%.
While solid results from the finance sector buoyed the index higher, sluggish growth from the energy, autos, transportation and technology sectors was a drag.
Coming to the technology sector, 73.8% of the index members have reported their quarterly results with total earnings increasing 5% on 2.5% higher revenues. Notably, 82.2% of the companies have surpassed earnings estimates, while 75.6% have beaten revenue estimates.
IT services comprise an important component of the technology sector and are anticipated to remain on the earnings growth trajectory in the quarter.
Here we take a look at two IT services companies that are set to report earnings on Nov 10:
Wix.com Ltd. WIX is unlikely to beat third-quarter 2016 earnings estimates as it has an unfavorable combination of a Zacks Rank #3 (Hold) and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
This is because, as per our proven model, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to beat earnings.We caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Wix.com is a cloud-based web development platform. The company's platform offers solutions that enable businesses, organizations, professionals and individuals to develop customized websites and application platforms.
During the last quarter, the company launched the Wix Pro Gallery globally that provides advanced functionality for photographers so as to enable them to create breathtaking online portfolios. Additionally, the company also partnered with Conde Nast to promote talented photographers.
While such initiatives will certainly help the company to attract more users to its platform, foreign currency risk remains a matter of concern.
WIX.COM LTD Price and EPS Surprise
WIX.COM LTD Price and EPS Surprise | WIX.COM LTD Quote
We note that Wix’s results compared unfavorably with the Zacks Consensus Estimate in three out of the last four quarters, resulting in an average negative surprise of 5.47%.
Luxoft Holding, Inc. LXFT too is unlikely to beat second-quarter fiscal 2016 earnings estimates as it has an unfavorable combination of a 0.00% Earnings ESP and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Luxoft Holding offers software development services and information technology solutions. Its software development services consist of software development and support, product engineering and testing and technology consulting.
During the last quarter, the company acquired Pelagiore AB, a Swedish provider of software platforms and services for in-vehicle infotainment systems. While such acquisitions strengthen the company’s product line for infotainment systems, intense competition and macroeconomic conditions remain concerns.
LUXOFT HOLDING Price and EPS Surprise
LUXOFT HOLDING Price and EPS Surprise | LUXOFT HOLDING Quote
Notably, Luxoft’s results have beaten the Zacks Consensus Estimate in two of the preceding four quarters with an average positive surprise of 19.31%.
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