#Earnings #Season #Home #Stretch #Heres
Key takeaways
- S&P 500 companies are beating earnings estimates by less than usual and by a lower than average rate so far this earnings season, according to a FactSet Research analysis.
- Earnings from major technology companies last week boosted the index’s overall earnings growth to more than 5% from 3.6% the previous week.
- Demand for artificial intelligence (AI) will remain in focus this week when Palantir, Qualcomm and Arista Networks report results.
Third-quarter earnings season rolls into the house this week. The quarter appears to have been a mixed one for US companies, with companies widely beating estimates while trimming Q4 guidance.
Three-quarters of companies reporting earnings as of Friday night beat earnings estimates, just below the five-year average of 77%, according to FactSet Research. Overall, the index exceeded expectations by 4.6%, which is also below average.
On the positive side, last week was better than the weeks before. As of Friday, the index had reported earnings growth of 5.1%, up from 3.6% the previous week. Earnings got a boost from better-than-expected results from Alphabet (GOOG; GOOGL), Meta Platforms (META), and Amazon (AMZN). Apple (AAPL) and Intel (INTC), which missed earnings estimates, were a drag on growth.
Alphabet and Meta made the communications services sector the fastest-growing sector in the S&P 500, with profits up more than 20% from a year ago. Excluding technology giants, sector profit growth falls to around 7%. But even at that rate, it would still be the third-fastest growing sector in the index, behind health care and consumer discretionary.
The energy sector was the worst performing sector so far. Profits fell more than 25% from a year ago, the largest decline ever in any sector. Three of the five sub-industries reported lower profits: oil and gas refining and marketing (-81%), oil and gas exploration and production (-15%), and integrated oil and gas (-13%).
Companies have become more cautious about their earnings forecasts than Wall Street expected. Of the 55 companies forecasting fourth-quarter earnings, about 67% issued guidance that was lower than the Street consensus.
AI remains a focus with upcoming Palantir and Qualcomm earnings
About a fifth of the S&P 500 is scheduled to report its results this week, after which less than 10% of the index will remain to report results.
This week’s earnings include several companies with AI stories, including one of the index’s newest components: Palantir Technologies (PLTR), which reports after the closing bell on Monday. The company is expected to report growth in sales and profits this quarter.
Chip giant Qualcomm (QCOM) is scheduled to report on Wednesday afternoon. The results could be an indication of the demand for artificial intelligence devices, which is an area that Qualcomm is seeking to achieve with its artificial intelligence chips. Qualcomm stock is up about 15% since the beginning of the year.
Arista Networks (ANET), which develops and sells computer networking equipment to data center and cloud computing customers, is scheduled to report Thursday afternoon. Technology giants Microsoft and Amazon said last week that demand for artificial intelligence and cloud computing is so strong that they are having trouble keeping up. Arista’s earnings are expected to reflect the strength of this demand. Arista Networks shares are up nearly 70% so far this year.
#Earnings #Season #Home #Stretch #Heres
