Technology stocks’ quarterly releases are anticipated to reflect the negative impact of coronavirus (COVID-19) outbreak, which was first detected in China but rapidly transformed into a pandemic in the first-quarter 2020.
COVID-19-induced global lockdown situation, which has led to sluggish demand for smartphone, automotive and consumer electronics, has been taking a toll on the world economy.
Per the latest Earnings Preview, tech sector’s first-quarter earnings are anticipated to be down 0.7% from the year-ago quarter.
The rapidly spreading COVID-19 infection has caused disruptions in major economic zones, which then turned into a full-blown global crisis due to slowdown in productions and operations owing to factory shutdowns, and sluggish spending patterns. This is likely to have impacted the technology stocks significantly in the first quarter.
For instance, Texas Instruments TXN was hurt by underperformance of the Chinese factories during the quarter under review. Its first-quarter 2020 results reflect year-over-year decline in both earnings and revenues.
Meanwhile, Xilinx XLNX also reported year-over-year decline in its fourth-quarter fiscal 2020 earnings and revenues on account of coronavirus pandemic and Huawei ban.
Positives to Note
Nevertheless, coronavirus-induced work-from-home wave is likely to have bolstered sales of processors utilized in enterprise laptops and data center servers, which in turn is expected to have benefited the technology sector in the first quarter.
The semiconductor giant Intel INTC reported first-quarter 2020 results wherein both earnings and revenues surged from the year-ago quarter. The company benefited from robust modem sales and solid notebook demand as a result of coronavirus-induced crisis.
We believe this work-from-home scenario is likely to have benefited the companies offering video conferencing tools during the quarter under review.
Further, the growing adoption of contactless payment solutions in order to reduce the spread of COVID-19 is expected to have acted as a tailwind.
Additionally, growing proliferation of cloud-computing services, Artificial Intelligence (AI) and Internet of Things (IoT) are expected to have benefited the technology companies offering these services.
Sneak Peek on Few Upcoming Releases
In this backdrop, let’s see how the following technology stocks are poised ahead of their first-quarter 2020 results slated to be reported on Apr 28.
Alphabet’s GOOGL first-quarter performance is likely to have benefited from continued focus on innovation of its search segment, which accounts for significant portion of total revenues. Further, its expanding cloud services portfolio is likely to have contributed to the first-quarter performance.
However, intensifying cloud competition, higher expenses and litigation charges are likely to have weighed on the first-quarter performance. (Read more: What's in the Offing for Alphabet's Q1 Earnings?)
Our proven model doesn’t conclusively predict an earnings beat for Alphabet this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Notably, Alphabet has an Earnings ESP of -5.51% and a Zacks Rank #3.
Further, the Zacks Consensus Estimate for earnings has moved down by 5.5% to $10.97 per share over the past 30 days.
Paycom Software’s PAYC first-quarter performance is expected to have gained from robust new business wins and the high-margin recurring revenue business. Further, the differentiated product offering of Direct Data Exchange for all Paycom clients is expected to have aided customer additions in the to-be-reported quarter.
However, coronavirus-induced disruptions are anticipated to have negatively impacted the performance in the quarter to be reported. (Read more: Paycom to Report Q1 Earnings: What's in the Offing?)
Notably, the Zacks Consensus Estimate for earnings has moved south by 0.8% to $1.27 per share over the past 30 days.
Paycom has an Earnings ESP of -4.44% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Akamai Technologies’ AKAM first-quarter results are likely to reflect benefits from robust adoption of security solutions and solid traction for OTT video, courtesy of coronavirus-led stay-at-home-wave.
However, the company’s investments in re-structuring efforts are likely to have put pressure on margins in the to-be-reported quarter. (Read more: Akamai to Report Q1 Earnings: What's in the Cards?)
Notably, the Zacks Consensus Estimate for earnings has moved downward by 0.9% to $1.15 per share over the past 30 days.
Akamai has an Earnings ESP of -1.18% and a Zacks Rank #3.
MSCI MSCI first-quarter performance is expected to have benefited from robust adoption of its solutions, driven by strong demand for cost-effective investment strategies with sustainable and risk-optimized returns during the to-be-reported quarter.
However, coronavirus-induced crisis is expected to have affected average assets under management (AUM) in ETFs linked to MSCI indexes in the quarter under review. (Read more: MSCI to Report Q1 Earnings: What's in the Cards?)
Notably, the Zacks Consensus Estimate for earnings has moved south by 0.6% to $1.68 per share over the past 30 days.
MSCI has an Earnings ESP of 0.00% and a Zacks Rank #3.
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Click to get this free report Intel Corporation (INTC) : Free Stock Analysis Report Texas Instruments Incorporated (TXN) : Free Stock Analysis Report Xilinx, Inc. (XLNX) : Free Stock Analysis Report Akamai Technologies, Inc. (AKAM) : Free Stock Analysis Report MSCI Inc (MSCI) : Free Stock Analysis Report Alphabet Inc. (GOOGL) : Free Stock Analysis Report Paycom Software, Inc. (PAYC) : Free Stock Analysis Report To read this article on Zacks.com click here.