Chicago, IL – June 28, 2023 – Zacks Director of Research Sheraz Mian says, "We are off to a good start from the early Q2 results. These are from the 12 index members with fiscal quarters ending in May that have reported results in recent days."
Q2 Earnings: What Can Investors Expect?
Note: The following is an excerpt from this week’s Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>
Here are the key points:
2023 Q2 earnings for the S&P 500 index are expected to decline -9.4% from the same period last year on -0.5% lower revenues, with margin declines for the 6th consecutive quarter driving the earnings drop.
The -9.4% earnings decline in Q2 will be the 3rd consecutive quarter of earnings declines for the S&P 500 index, as it would follow the -3.4% decline in 2023 Q1 and -5.4% drop in 2022 Q4.
We are off to a good start from the early Q2 results. These are from the 12 index members with fiscal quarters ending in May that have reported results in recent days.
Total Q2 earnings for these 12 S&P 500 members are up +9.7% from the same period last year on +3.1% higher revenues, with 91.7% beating EPS estimates and 75% beating revenue estimates.
Regular readers of our earnings commentary know that we have flagged a notable stabilization in the estimate revisions trend since the start of 2023 Q2, reversing the persistently negative trend that had been in place for almost a year prior.
Earnings estimates in the aggregate for the S&P 500 index have come down only a touch since the start of April, with several sectors starting to see positive estimate revisions. These sectors include Construction, Industrial Products, Autos, Tech, Medical, and Retail.
The favorable shift in the Tech sector’s earnings outlook is particularly significant since the sector brings in almost 26% of all S&P 500 earnings. Some of the major Tech stocks that are at the forefront of the market’s gains this year are also experiencing positive estimate revisions. Take, for example, Meta Platforms META and Nvidia Corp. NVDA.
Meta is currently expected to bring in $11.94 per share on $127.08 billion in revenues this year. The $11.94 per share in earnings estimate is up from $10.22 on March 31st and $8.06 on January 31st. A big part of Meta’s improving earnings outlook has resulted from more effective cost controls. But that’s hardly the only reason for rising earnings estimates, as revenue estimates have also been steadily increasing.
The Nvidia example is relatively more straightforward, given the company’s blockbuster quarterly results on May 24th and record guidance upgrade. Nvidia is currently expected to bring in $7.66 per share in earnings this year (fiscal year ends in January) on $42.6 billion in revenues. Nvidia’s $7.66 EPS estimate is up from $4.48 on March 31st.
We are not suggesting that the improving earnings outlook for Meta and Nvidia are representative of the entire Tech sector, but they nevertheless prove the point that the profitability picture for parts of the sector has turned around in recent weeks.
As noted earlier, earnings estimates for the Tech sector have increased since the start of April 2023, reversing the trend that had been in place for the preceding year.
Please note that this representation of the Zacks Tech sector above is nothing more than a proxy for the sector as a whole. The important point to note here is that the current $3.16 per ‘share’ estimate is up from $3.12 on March 31st.
The Earnings Big Picture
As we have pointed out all along, aggregate earnings estimates for 2023 peaked in April last year and consistently came down since then. Even accounting for the aforementioned favorable revisions trend in recent weeks, aggregate 2023 earnings estimates have declined by -13.4% since the April 2022 peak and -14.6% on an ex-Energy basis.
Hard to tell at this stage if the revisions trend will remain on its recent positive trajectory or revert back to its original negative trend. But it is nevertheless a market-friendly development.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
See Stocks Free >>
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
https://www.zacks.com
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
