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Q1 Earnings Season Scorecard and Featured Research on Apple, Microsoft & Meta Platforms

Tuesday, May 2, 2023

The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features a real-time update on the ongoing Q1 earnings season in addition to new research reports on 16 major stocks, including Apple Inc. (AAPL), Microsoft Corporation (MSFT) and Meta Platforms, Inc. (META). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.

You can see all of today’s research reports here >>>

Q1 Earnings Season Scorecard

Including all of this morning's releases, we now have Q1 results from 310 S&P 500 members or 62% of the index's total membership.

Total earnings for these companies are down -2.2% from the same period last year on +3.9% higher revenues, with 78.1% beating EPS estimates and 73.9% beating revenue estimates.

The proportion of these 310 index members beating both EPS and revenue estimates is 61.6%. This 61.6% 'blended' beats percentage compares to 57.4% in 2022 Q4, 54.5% in 2022 Q3, 57.1% in Q2, 63.9% in Q1 and the 5-year average of 59.4%.

Looking at 2023 Q1 as a whole, combining the actuals that have come out with estimates for the still-to-come companies, total S&P 500 earnings are now expected to be down -5.4% on +3.1% higher revenues.

Earnings for the current period (2023 Q2) are currently expected to be down -7.4% from the same period last year on -0.6% lower revenues. This is only modestly down from -7.2% and -0.5% expected at the end of March 2023.

For more details about the Q1 earnings season and evolving expectations for the coming periods, please check out our weekly Earnings Trends report here >>> 2023 Earnings: Good Enough, But Not Great

Featured Analyst Reports

Apple shares have been standout performers this year, with the stock gaining +29.4% vs. +20.3% gain for the Zacks Tech sector and +9% gain for the S&P 500 index. Ahead of the company's March-quarter earnings release after the market's close on Thursday (May 4th), the Zacks analyst sees Apple's revenues to grow year over year. Growing services subscriber base and a strong liquidity position are key catalysts for Apple’s prospects.

However, Apple expects the March quarter’s year-over-year revenue growth to be similar to that of the December quarter due to unfavorable forex. For iPhone, Apple expects the March quarter’s year-over-year revenue growth to accelerate relative to the December quarter’s year-over-year revenue growth.

For Mac and iPad, revenues are expected to decline in double digits on a year-over-year basis due to challenging comparison and macroeconomic headwinds. Services revenue growth is expected to be negatively impacted by challenging macroeconomic conditions, as well as weakness in digital advertising and gaming.

(You can read the full research report on Apple here >>>)

Shares of Microsoft have outperformed the Zacks Computer - Software industry over the past six months (+43.4% vs. +37.9%). The company’s third-quarter fiscal 2023 results were driven by improvement in Intelligent Cloud and Productivity and Business Processes, offset in part by a decline in More Personal Computing. Intelligent Cloud revenues increased in the quarter, driven by Azure and other cloud services. Productivity and Business

Processes revenues increased due to the Office 365 Commercial. Continued momentum in the small and medium businesses and frontline worker offerings, as well as gain in revenue per user drove top-line growth. More Personal Computing revenues decreased due to Windows and Devices. Steady performance in Talent Solutions aided LinkedIn revenues.

However, declining gaming revenues and videogame sales were headwinds. Increasing spend on Azure enhancements amid stiff competition in the cloud space from Amazon is likely to dent margins.

(You can read the full research report on Microsoft here >>>)

Shares of Meta Platforms have outperformed the Zacks Internet - Software industry over the past year (+14.7% vs. -14.0%). The company is benefiting from steady user growth across all regions, particularly Asia Pacific. Increased engagement for its products like Instagram, WhatsApp, Messenger, and Facebook has been a major growth driver. Its restructuring plan is expected to reduce expenses driving profitability.

However, challenging macroeconomic conditions is negatively impacting Meta’s advertising revenues. Unfavorable forex, targeting and measurement headwinds due to Apple’s iOS changes are headwinds. Its second-quarter guidance reflects macroeconomic and forex concerns.

The company continues to expect Reality Labs operating losses to increase year-over-year in 2023. Ongoing regulatory developments including upcoming IDPC decision on transatlantic data transfers is expected to weigh down its prospects.

(You can read the full research report on Meta Platforms here >>>)

Other noteworthy reports we are featuring today include Anheuser-Busch InBev SA/NV (BUD), Diageo plc (DEO) and 3M Company (MMM).

Director of Research

Sheraz Mian

Note: Sheraz Mian heads the Zacks Equity Research department and is a well-regarded expert of aggregate earnings. He is frequently quoted in the print and electronic media and publishes the weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here>>>

Today's Must Read

Robust Portfolio, Services Strength to Benefit Apple (AAPL)

Adoption of Cloud & Office 365 Strength Aid Microsoft (MSFT)

User Growth, Instagram Strength Aids Meta Platforms (META)

Featured Reports

AB InBev's (BUD) Focus on Innovation to Boost Market Share
Per the Zacks analyst, AB InBev remains focused on solidifying market position by introducing near beer alternatives, along with no- and low-alcohol beers to resonate with the changing consumer demand

Premiumization & Pricing Plans Aid Diageo (DEO) Amid Inflation
Per the Zacks analyst, premiumization efforts, market recovery, pricing actions and supply productivity savings have boosted Diageo's performance. This has helped offset the ongoing cost inflation.

3M (MMM) Banks on Cost Controls Amid Demand Softness
Per the Zacks analyst, 3M's cost-control initiatives should help the company stay afloat as it grapples with lower disposable respirator demand and reduced consumer electronics demand.

Steady Investment & Renewable Focus Aid Eversource (ES)
Per the Zacks analyst, Eversource's investment of $21.5 billion within 2023-2027 time period will boost clean electricity generation, fortify its infrastructure and increase reliability of its service

Ovintiv (OVV) to Gain from Premium Asset Portfolio
The Zacks analyst likes Ovintiv's premium inventory of drilled uncompleted wells that can be quickly brought into production. However, the company's low current ratio signals financial difficulties.

Solid Growth in Exparel Sales Boost Pacira (PCRX)
Per the Zacks Analyst, Pacira's lead drug Exparel has been witnessing strong uptake and growth on the back of expanded indications. However, the lack of other candidates in the pipeline is a woe.

Robust Rayaldee Sales Continue to Aid OPKO Health (OPK)
The Zacks analyst is upbeat about OPKO Health's robust Rayaldee sales despite its operation in a highly competitive market.

New Upgrades

Digital Sales & Expansion Boosts Chipotle's (CMG) Prospects
Per the Zacks analyst, Chipotle is posied to benefit from strong digital sales, rise in prices and menu innovation. This and focus on new restaurant openings including a Chipotlane bode well.

PACCAR (PCAR) To be Aided by Improved Product Mix
PACCAR's next-gen models like Peterbilt 579EV, hydrogen fuel-cell Kenworth T680E and Peterbilt autonomous Model 579 are set to improve its product mix and bolster revenues, per the Zacks analyst.

Xerox (XRX) is Gaining From Cost and Productivity Initiatives
Per the Zacks Analyst, Xerox's cost control and productivity improvement initiative called "Project Own It," is fetching results in the form of strong margins.

New Downgrades

Weak Macro Environment, Integration Efforts Ail Aspen (AZPN)
Per the Zacks analyst, uncertain macro environment, ongoing integration and transformation efforts and cautious software spending in the chemical industry are weighing down on the Aspen's performance.

High Expenses, Leverage Concern First American (FAF)
Per the Zacks analyst, First American's increase in higher personnel costs, operating expenses induces higher expenses that weigh on margin expansion. High leverage induces rise in interest expense.

High Costs, Loan Concentration to Hurt Valley National (VLY)
Per the Zacks analyst, elevated expenses due to inorganic growth efforts will likely hurt Valley National's profits. A concentrated loan portfolio is another woe which makes us apprehensive.

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

Apple Inc. (AAPL) : Free Stock Analysis Report

Microsoft Corporation (MSFT) : Free Stock Analysis Report

3M Company (MMM) : Free Stock Analysis Report

Diageo plc (DEO) : Free Stock Analysis Report

Anheuser-Busch InBev SA/NV (BUD) : Free Stock Analysis Report

Meta Platforms, Inc. (META) : Free Stock Analysis Report

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Zacks Investment Research