We are now at the back-half of the Q3 earnings reporting season with results from 332 S&P 500 index members (74.1% of the index’s total market capitalization) already out (as of Nov 1).
As per the latest Zacks Earnings Outlook report, total earnings of these 332 index members inched up 1.9% year over year on the back of 1.3% higher revenues. Beat ratios are impressive with 72.9% beating EPS estimates and 55.4% coming in ahead of top-line expectations.
Another 168 companies are set to report results over the next few weeks. Notably, earnings are now anticipated to show positive growth for the first time after six quarters.
Overall third-quarter earnings for S&P 500 companies are anticipated to be up by 2.1% (compared to an earlier estimate of +2%) from the year-ago quarter on revenues that are estimated to increase 1.4%.
The growth will be driven by solid results from the Finance sector, backed by robust performance from big names like J.P. Morgan and Goldman Sachs (NYSE:GS). Finance’s impressive show is anticipated to mitigate sluggish growth from the Energy, Autos, Transportation as well as Technology sector.
Technology earnings growth is expected to remain muted due to disappointing results from Apple (NASDAQ:AAPL) . Although the iPhone maker beat the fourth-quarter 2016 earnings estimates by a penny, we note that earnings declined 15% on a year-over-year basis as revenues declined 9.9%.
We now have third-quarter results from 73.4% of the sector’s total market capitalization in the S&P 500 index. So far, total earnings are up 0.8% year over year on 1.3% higher revenues, with 88.8% beating earnings estimates and 73% beating revenue expectations. Earnings for the technology sector are now anticipated to be up 2.9% in spite of 1% lower revenues.
E-Commerce is an important component of the technology sector and is anticipated to follow the same earnings growth trajectory in the quarter. Here, we take a look at three e-commerce companies set to report earnings on Nov 3:
Mercadolibre Inc. (NASDAQ:MELI) is likely to beat third-quarter fiscal 2016 earnings estimates as it has a favorable combination of a Zacks Rank #1 (Strong Buy) and an Earnings ESP of +6.02%. You can see the complete list of today’s Zacks #1 Rank stocks here.
This is because, as per our proven model, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 (Buy) or 3 (Hold) to beat earnings. Simultaneously, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Mercadolibre will continue to benefit from expanding footprint in countries like Mexico, Peru and Colombia. The company’s focused investment on developing the marketplace is expected to boost volumes and improve user engagement, which will eventually drive top-line growth.
We note that Mercadolibre’s results compared favorably with the Zacks Consensus Estimate in the last four quarters, with an average positive surprise of 28.02%.
MERCADOLIBRE IN Price and EPS Surprise
MERCADOLIBRE IN Price and EPS Surprise | MERCADOLIBRE IN Quote
However, Travelport Worldwide Limited (NYSE:TVPT) 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%. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Nevertheless, strong growth in International markets, innovative product launches and customer win is anticipated to drive higher transaction volumes and revenues. The re-pricing of debt that resulted in lower interest expense will boost bottom-line growth. However, challenging global macro-economic environment and Brexit related issues will weigh on growth in the quarter.
Notably, Travelport’s results have beaten the Zacks Consensus Estimate in the trailing four quarters with an average positive surprise of 22.68%.
Similarly, Stamps.com Inc (NASDAQ:STMP) is unlikely to beat third-quarter 2016 results as it has unfavorable combination of Zacks Rank #3 and Earnings ESP of 0.00%.
Stamps.com provides Internet-based services for mailing or shipping letters, packages or parcels anywhere in the U.S. The acquisition of ShippingEasy in the second quarter will boost top-line growth. However, increased investments related to acquisition and support of mailing & shipping business can drag down profitability.
We note that Stamps.com’s results compared favorably with the Zacks Consensus Estimate in the last four quarters, with an average positive surprise of 61.42%.
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