As of Nov 2, 364 S&P 500 members, representing 72.6% of the index’s total market capitalization, have already reported their third-quarter results.
While total earnings for these companies are up 1.6% on a year-over-year basis (72.3% of the companies beat EPS estimates), total revenue increased 1.6% on a year-over-year basis (54.7% of the companies beat top-line estimates).
Notably, after five consecutive quarters of decline, earnings are finally back in the positive territory. However, with every passing day, positive surprises on the revenue front are becoming rarer to find.
As per our latest Earnings Outlook report, overall third-quarter earnings for S&P 500 companies are anticipated to be up 2.4% (compared to an earlier estimate of a rise of 2.1%) from the year-ago quarter on revenues that are estimated to increase 1.4%.
The growth is expected to be driven by solid results from the finance sector. However, finance’s impressive show is anticipated to be mitigated by sluggish growth from the energy, autos, transportation and technology sectors.
In the technology sector in particular, 74% of the index members have reported their quarterly results with total earnings increasing 1% on 1.4% higher revenues. Notably, 84.2% of the companies have surpassed earnings per share estimates, while 71.1% have beaten revenue estimates.
However, technology earnings growth is expected to remain muted due to disappointing results from Apple AAPL. Although the iPhone maker beat fourth-quarter 2016 earnings estimates by a penny, we note that earnings declined 15% on a year-over-year basis as revenues fell 9.9%.
Here we take a look at two technology companies that are set to report earnings on Nov 4:
Shutterstock, Inc. SSTK is unlikely to beat third-quarter 2016 earnings estimates as it has an unfavorable combination of a Zacks Rank #4 (Sell) and an Earnings ESP of 0.00%. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
This is because, as per our proven model, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to beat earnings. We caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Shutterstock is a global marketplace for digital imagery. It provides licensed photographs, vectors, illustrations and videos to businesses, marketing agencies and media organizations around the world.
During the last quarter, the company acquired two popular photo collections namely, The Kobal Collection and The Art Archive to boost its collection of photos. More importantly, the company launched a plugin for Adobe Photoshop through which users can have access to its wide collection of stock images. Notably, Shutterstock also attained the milestone of 100 million images in September.
While these developments augur well for the company, foreign currency risk, interest rate risk and inflation risk can adversely affect its earnings in the third quarter.
We note that Shutterstock’s results compared favorably with the Zacks Consensus Estimate in three out of the last four quarters, resulting in an average positive surprise of 28.29%.
Ebix Inc. EBIX too is unlikely to beat third-quarter 2016 earnings estimates as it has an unfavorable combination of a Zacks Rank #3 and an Earnings ESP of 0.00%.You can see the complete list of today’s Zacks #1 Rank stocks here.
Ebix is one of the leading international suppliers of software and e-commerce solutions to the insurance industry. The company strives to work collaboratively with clients to develop innovative technology strategies and solutions that address specific business challenges.
During the last quarter, Ebix entered into serious discussions with Patriot National PN to acquire it. If the merger materializes, Ebix will become the world’s largest straight through processing insurance services provider.
In September, Ebix executed e-governance contracts for a number of public sector undertakings in India. While these developments remain positives for the company, increasing competition and currency rate fluctuations remain concerns for the company going into the quarterly earnings.
Notably, Ebix’s results have beaten the Zacks Consensus Estimate in the preceding four quarters with an average positive surprise of 14.60%.
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