We are in the last stretch of the Q3 earnings season, with 406 S&P 500 members or 85.4% of the index’s total membership having already reported their numbers, as of Nov 3, according to the latest Zacks Earnings Preview.
Among the various sectors, Technology has emerged as one of the outperformers. Per the latest Earnings Preview, 85% of the sector’s market cap in the S&P 500 index has already reported, as of Nov 3. According to the report, approximately 81.8% of the companies delivered positive earnings surprises, while 86.4% of the companies beat top-line expectations.
Earnings of these companies are up 22.4% from the same period last year on 9.3% higher revenues, mainly driven by solid performance of tech heavyweights such as Facebook FB, Apple AAPL Alphabet GOOGL, Microsoft and Intel.
We note that the technology sector has been a strong performer on a year-to-date basis. The sector is benefiting from increasing demand for cloud-based platforms, growing adoption of Artificial Intelligence (AI) solutions, Augmented/Virtual reality devices, autonomous cars, advanced driver assisted systems (ADAS) and Internet of Things (IoT) related software.
Though the overall tech sector is poised to shine in the quarter to be reported, this does not ensure earnings beat for all companies in the space. It should be noted that a company’s earnings outperformance is dependent on the overall business environment as well as management’s ability to implement operating and strategic plans.
In other words, a company may perform poorly despite a favorable business environment if it fails to capitalize on the opportunities due to lack of execution.
Let’s See How DXC, CSRA, SNAP and SINA are Placed
The end-to-end IT services provider DXC Technology Company DXC is scheduled to report second-quarter fiscal 2018 results tomorrow. The Zacks Consensus Estimate for earnings and revenues are pegged at $1.53 per share and $5.99 billion respectively. Estimates, when compared with the year-ago quarter’s actual figures, indicate remarkable growth of 150.7% for earnings and 220.3% for revenues. The company carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
DXC Technology’s Q2 results are likely to benefit from the Computer Sciences Corporation and Hewlett Packard Enterprise’s Enterprise Services business merger, strategic partnerships and acquisitions. However, escalating interest expenses due to increased debt burden may dampen the company’s profitability, offsetting the benefit of higher revenues to some extent. (Read: Merger, Partnerships & Acquisitions to Drive DXC Q2 Earnings)
DXC Technology Company. Price and EPS Surprise
DXC Technology Company. Price and EPS Surprise | DXC Technology Company. Quote
Let’s take a sneak peek at CSRA Inc. CSRA which is scheduled to report second-quarter fiscal 2018 results. We expect the company to deliver strong results driven by frequent contract wins, solid backlog, improving federal spending environment and revenue visibility. Moreover, CSRA has been benefiting from its domain expertise and strong partnership base that includes the likes of ServiceNow, Microsoft and Red Hat among others. The small tuck-in acquisition of NES is anticipated to boost the company’s ability to win contracts. (Read: CSRA's Q2 Earnings to Gain From Contract Wins, Solid Backlog)
The Zacks Consensus Estimate for the company’s revenues is pegged at $1.27 billion for the to-be-reported quarter. In addition, the Consensus Estimate for earnings is pegged at 47 cents. The stock has a Zacks Rank #3 (Hold).
Another tech company, Snap Inc. SNAP is also set to report third-quarter 2017 results. The stock carries a Zacks Rank #3.
It should be noted that the company’s growth prospect depends on two key factors — user base growth and ad revenues. It is most likely that the company’s third-quarter results will follow the previous quarter’s trend, in which though it registered year-over-year increase in user base and ad revenues, rate of growth witnessed a declining trend. Also, the slash in 2017 U.S. ad revenue estimates for Snapchat by market research firm, eMarketer, doesn’t bode well for the company. (Read: Snap to Report Q3 Earnings: What's in the Cards?)
SINA Corporation SINA is slated to release third-quarter results. The Zacks Consensus Estimate for earnings and revenues are pegged at 73 cents and $409.8 million, indicating year-over-year growth of 30.4% and 49.1%. The stock carries a Zacks Rank #3.
Analysts covering the stock expect SINA's quarterly results to be driven by an increase in user base and monetization efforts. SINA’s user base has been increasing driven by growth in the number of mobile users. According to CNNIC report, mobile users in China accounted for 96.4% of total 751 million Internet users as of August 2017. We believe SINA’s popular mobile portal and service offerings will enable the company to capitalize on the growing mobile market.
Nonetheless, some headwinds with regard to obtaining new media rights for sports in China may limit its top-line growth. In addition to this, the company faces tougher year-over-year comparison. In third-quarter 2016, the company’s revenues were largely driven by Olympic Games. The soon-to-be reported quarter did not see an event of such magnitude. (Read: What Lies in the Cards for SINA This Earnings Season?)
Sina Corporation Price and EPS Surprise
Sina Corporation Price and EPS Surprise | Sina Corporation Quote
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