The technology sector is expected to see a weak fourth-quarter 2018 earnings season. Apple’s guidance cut along with lackluster results from chipmakers like Texas Instruments and Intel are mainly to be blamed.
Sluggish iPhone demand in Greater China and fewer upgrades to its flagship device in developed countries are the primary reasons behind Apple’s lowered guidance. Weak iPhone sales expectation had compeled a number of semiconductor companies, including Qorvo, Skyworks, Lumentum, which are also reportedly Apple’s suppliers, to trim their top-line outlook.
Notably, tariff imposition owing to the U.S.-China trade tussle has been taking a toll on chipmakers for a while now. China happens to be one major market for semiconductors, while the United States is the biggest semiconductor manufacturing country.
Texas Instruments stated that demand was weak from Chinese smartphone manufacturers in the reported quarter.
Moreover, Intel’s warning over sluggish cloud spending doesn’t bode well for the sector. Another notable chip-maker NVIDIA slashed its top-line guidance citing macroeconomic weakness in China.
Per the latest Earnings Preview, technology sector earnings are estimated to grow 4.2% on revenue growth of 4.7%, both down significantly from third-quarter growth rates of 27.3% and 12.7%, respectively.
Let’s take a sneak peek into five technology companies that are set to report quarterly earnings on Jan 30:
Tel Aviv, Israel-based Check Point Software Technologies Ltd. CHKP is likely to benefit from growing adoption of its cloud-based solutions. Additionally, continued strength in security subscription is expected to boost top-line growth of this Zacks Rank #3 (Hold) stock.
However, Check Point is unlikely to deliver a positive earnings surprise, as according to the Zacks model, only a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 has a good chance of beating estimates, if it also has a positive Earnings ESP. Meanwhile, Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.
The Zacks Consensus Estimate for Check Point’s fourth-quarter earnings has been steady at $1.63 over the past seven days. (Read More: Check Point to Report Q4 Earnings: What's in Store?)
Check Point Software Technologies Ltd. Price and EPS Surprise
Check Point Software Technologies Ltd. Price and EPS Surprise | Check Point Software Technologies Ltd. Quote
Meanwhile, Facebook’s FB fourth-quarter user base growth will be closely monitored by all. The company has been benefiting immensely from the growing popularity of Stories across all its major platforms, with Instagram taking the centerstage.
However, the Menlo Park, CA-based company has an unfavorable combination of a Zacks Rank #3 and an Earnings ESP of -3.32%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The consensus mark for fourth-quarter earnings has been steady at $2.17 over the past seven days. (Read More: Facebook to Report Q4 Earnings: What's in the Cards?)
Facebook, Inc. Price and EPS Surprise
Facebook, Inc. Price and EPS Surprise | Facebook, Inc. Quote
Redmond, WA-based Microsoft’s MSFT second-quarter fiscal 2019 results are expected to benefit from enterprise strength, robust Office 365 and Azure adoption. Microsoft is firing on all cylinders to catch up with Alphabet’s G-Suite by empowering Office 365. LinkedIn is also growing faster than previously anticipated.
However, Microsoft also has an unfavorable combination of an Earnings ESP of -3.32% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Notably, the Zacks Consensus Estimate for Microsoft’s second-quarter earnings has been steady at $1.09 over the past seven days. (Read more: Azure & Office 365 to Aid Microsoft's Q2 Earnings)
Microsoft Corporation Price and EPS Surprise
Microsoft Corporation Price and EPS Surprise | Microsoft Corporation Quote
San Jose, CA-based PayPal Holdings’ PYPL fourth-quarter 2018 results are expected to gain from strong growth in Active customer accounts and total payment volume (“TPV”). PayPal is currently riding on its well-performing Venmo, Choice and One Touch, which are aiding the expansion of its customer base.
Nonetheless, PayPal is unlikely to deliver a positive earnings surprise as it has an unfavorable combination of a Zacks Rank #3 and an Earnings ESP of 0.00%.
Notably, the consensus mark for fourth-quarter earnings have been steady at $1.09 over the past seven days. (Read more: PayPal to Report Q4 Earnings: What's in the Cards?)
PayPal Holdings, Inc. Price and EPS Surprise
PayPal Holdings, Inc. Price and EPS Surprise | PayPal Holdings, Inc. Quote
Lastly, Montreal, Canada-based CGI Group’s GIB first-quarter fiscal 2019 results are expected to benefit from organic revenue growth and cost savings related to restructuring program completed in the fourth quarter of fiscal 2018.
However, first-quarter fiscal 2019 bookings are expected to hurt from the U.S. government shutdown. Moreover, uncertainty over Brexit doesn’t bode well for the stock.
Moreover, CGI Group currently has a Zacks Rank #4.
CGI Group, Inc. Price and EPS Surprise
CGI Group, Inc. Price and EPS Surprise | CGI Group, Inc. Quote
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