Apple, Facebook and Gilead Sciences are part of Zacks Earnings Preview
Zacks Equity Research
Updated
For Immediate Release
Chicago, IL – May 01, 2017 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Apple (NASDAQ: AAPL – Free Report ), Facebook (NASDAQ: FB – Free Report ) and Gilead Sciences (NASDAQ: GILD – Free Report ).
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The Tech Sector's Strong Earnings Power
We will see if this week’s earnings reports from Apple (NASDAQ:AAPL – Free Report ) and Facebook (NASDAQ: FB – Free Report ) can sustain the strong showing from many other Technology players in recent days. The sector’s Q1 results and management’s commentary for the current and coming quarters support Technology stocks impressive stock market performance this year (the Zacks Tech sector is up +11.2% year-to-date vs. +6.8% gain for the S&P 500 and +3.7% for the Russell 2000).
The Technology sector’s Q1 results are building on the momentum we have been seeing this earnings season from a diverse cross-section of companies. Not only is an above-average proportion of companies beating estimates, particularly revenue estimates, but growth has continued to accelerate from the pace that we have been seeing in recent quarters and is on track to reach its highest level in many years. Importantly, estimates for the current period (2017 Q2) appear to be holding up nicely as well. The continuation of these trends through the rest of this earnings season should serve as a reassuring development for the market.
Key Earnings Reports for the Week of May 1st
We are past the halfway mark in the Q1 reporting cycle for the S&P 500 index, with results from 288 index members already out, as of Friday April 28th. This week brings in results from more than 1000 companies, including 126 from the S&P 500 index. There is no shortage of big-name operators coming out with results this week, but we are featuring three of those here:
Gilead Sciences (NASDAQ:GILD – Free Report ) – Gilead reports results after the market’s close on Tuesday, May 2nd. The stock is down -4.3% in the year-to-date period, underperforming the Zacks Biotech industry’s +4.8% gain and the Zacks Medical sector’s +6.8% gain. The stock has done poorly in response to each of the last four quarterly releases, irrespective of whether it beat estimates or not. A key issue in the Gilead story has been the company’s excessive reliance on its two products in the hepatitis C and HIV markets that combined account for almost 90% of total sales. The hepatitis C product has been a big revenue and cash flow driver in recent years, but currently faces an uncertain pricing outlook and tough competitive marketplace and the HIV product is on track to lose patent. It is this uncertain outlook for these two key products and limited pipeline that has been the key stock driver lately.
Apple – Apple will report results after the market’s close on Tuesday, May 2nd. The company is expected to report $2.01 per share on $52.6 billion in revenues, up +5.9% and +4.1% from the year-earlier levels, respectively. The stock was up strongly on the last earnings release when it handily beat on the top- and bottom-lines and showed impressive momentum in its services business that management guided towards doubling over the next four years. The stock has been a solid performer since the last earnings report and is currently up +24% in the year-to-date period, handily outperforming the Zacks Tech sector (up +11.2%) and the S&P 500 index (up +6.8%). The focus in the quarterly report will be the iPhone shipments and commentary about the iPhone 8 cycle along with iPhone ASPs (average selling price) and gross margins. The company’s China performance will also be important, though a number of the China metrics will have relatively easier comparisons. Apple’s enormous weightage in the Tech sector as well as the S&P 500 index guarantee that its results will move the aggregate growth pace. After all, the iPhone maker is expected to bring in an estimated 18% of the sector’s total earnings in Q1.
Facebook – Facebook reports Q1 results after the market’s close on Wednesday May 3rd. The company is expected to report $0.88 per share on $7.8 billion in revenues, up +54% on +45.9% higher revenues from the year-earlier period, respectively. The stock didn’t do much following the December-quarter results, but was down following the September quarter report even though it handily beat EPS and revenue estimates. Facebook has never missed revenue estimates, though it came short of EPS estimates in its first three quarterly releases as a public company and a few times after that, but has been beating estimates consistently since the September 2015 quarter. The stock’s performance has been very impressive lately; it is up +30.4% in the year-to-date period vs. +6.8% gain for the S&P 500 index. Given these strong gains in the run up to the release, the stock could be risk of losing ground if trends in monthly active users or monetization trajectory for Instagram turn out to be less than perfect.
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