The latest earnings season was eagerly awaited, as particularly the major tech companies are facing headwinds. Currently around 50 % of US companies in the S&P 500 Index have reported, and the results have been mixed. The number of positive earnings surprises is well below the ten-year average. The stars of previous years have lost much of their shine. Only Meta Platforms surprises positively.
The majority of the so-called FAANG stocks disappointed when presenting their numbers for the last quarter. Apple missed Wall Street's earnings expectations for the first time in almost seven years. Earnings per share were USD 1.88, about 3.1 % below the consensus estimate of USD 1.94, while revenue was USD 115.15 billion, 5% below analysts' estimate of USD 121.14 billion.
The company cited production disruptions in China, supply chain issues and China's zero-Covid policy as reasons. However, the very strong US dollar last year also had a negative impact on the company's results.
Alphabet, the world's largest online advertising company, also fell short of analysts’ expectations for both earnings and revenues. Alphabet's revenue rose by only 1 % to 76.05 billion dollars in the last quarter. The important online advertising business was negatively affected by the reluctance of many customers.
The world's largest online retailer, Amazon, announced that revenue expectations for the last quarter were exceeded, but dampened Wall Street's expectations for the current quarter.
Only Meta Platforms, which includes Facebook and Instagram, outperformed analysts' forecasts. Shares of the social media company rose 23.3 % or USD 35.65 to USD 188.77 after the release of the quarterly results. Investors liked the statement by company founder Mark Zuckerberg, who intends to maintain his leadership claim in the company with far-reaching efficiency improvements in the group. Around 11,000 employees have fallen victim to the restructuring plans so far. Furthermore, investments will be cut back to USD 30 – 33 billion (original plan USD 34 – 37 billion). In addition to cost savings, the Meta's chief financial officer has announced plans to expand the stock buyback program by USD 40 billion.
As of Friday, February 3, slightly more than half of the S&P 500 companies have submitted their reports for the past quarter. The results are quite mixed. While an average revenue growth of 5.5 % was reported, profit growth was minus 3.1 %. The largest declines were reported by companies in the commodities sector, followed by the communications and financial services sectors. By far the largest profit growth was reported by the energy sector (+69%). But the industrial stocks and utilities also reported double-digit profit growth in the fourth quarter of 2022.
Only around 69 % of the companies that have reported to date exceeded analysts' earnings expectations, which is significantly below the ten-year average of around 77 %. This week (February 6th to 10th), another 94 companies from the S&P 500 index will report on their last quarter. This includes important industry leaders such as Linde, PayPal, PepsiCo, Philip Morris, and Walt Disney.
The balance could still improve in favour of positive surprises. We will publish a final assessment at the end of the reporting season.
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