Chicago, IL – May 2, 2022 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Amazon AMZN, Alphabet GOOGL, Apple AAPL, Meta FB and Microsoft MSFT.
Making Sense of Tech Sector Earnings After a Big Week of Results
Amazon's disappointment isn't exactly in the same league as what we saw from Netflix some time back. Amazon's labor-intensive core business with its heavy logistics component leaves it vulnerable to the by-now well-known headwinds of inflation, supply chain issues and higher fuel costs.
That said, both Netflix and Amazon were big beneficiaries of Covid lockdowns that pulled forward demand that needs to be accounted for now. We have seen a number of other Covid winners suffer the same fate in recent days, with Teladoc another recent example.
Among the Big 5 Tech players – Apple, Microsoft, Alphabet, Meta and Amazon – Amazon stood out for missing estimates and guiding lower. All the other Tech giants came out with impressive results, though higher expenses and margin pressures appear to be recurring themes from 'Big 5 Tech' as well.
Total Q1 earnings for the 'Big 5 Tech' players are down -8.4% from the same period last year on +11.4% higher revenues, with a 421 basis-points (bps) compression in net margins. First quarter net margins are down for each of the 5 Tech leaders, with the biggest declines at Meta and Alphabet at -954 and -998 bps, respectively.
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' players and 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
We have crossed the halfway mark in the Q1 reporting cycle, with results from 276 S&P 500 members out through the end of Friday, April 29th, 2022. Total earnings for these companies are up +3.9% from the same period last year on +13.4% higher revenues, with 80.8% beating EPS estimates and 74.6% beating revenue estimates.
We remain in the heart of the Q1 earnings season this week, with more than 1300 companies reporting results, including 159 S&P 500 members. By the end of this week, we will have seen Q1 results from 87% of the index members.
The beats percentages were earlier tracking at their lowest levels in recent quarters, but they have notably improved over the past week.
Looking at Q1 as a whole, with actuals for these 276 index members and estimates for the still-to-come companies, total earnings are expected to be up +7.6% on +12.1% higher revenues.
Excluding the -15.7% decline in Finance sector earnings, the growth rate for the index improves to +14.8%. On the other hand, the Energy sector has a very robust earnings profile at present, with the sector expected to bring in +228.4% more earnings than the year-earlier period on +55.6% higher revenues.
Excluding the hefty Energy sector contribution, earnings for the remainder of the index would be up only +1.8% on +8.9% 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 >>>>Earnings Estimates Come Under Pressure Outside of Energy
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