Internet Stock Q4 Earnings On Feb 6: AKAM, SNAP, MTCH & More

With 251 S&P 500 members having already reported results, the fourth-quarter cycle is at the halfway mark. Almost 92 S&P 500 members are set to report this week (Feb 5-9).

Per the latest Earnings Preview, total earnings for the S&P 500 index are up 13% on a year-over-year basis driven by 7.7% growth in revenues.

According to the last Earnings Trends dated Jan 31, technology is one of the seven sectors anticipated to report double-digit earnings growth. The other sectors are Energy, Aerospace, Construction, Industrial Products, Basic Materials and Auto sectors.

Total earnings for the technology sector increased 21.9% on revenue growth of 10.5%. The sector has been benefiting from strong 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.

Here we take a look at five technology companies that are set to report on Feb 6.

Cambridge, MA-based, Akamai Technologies Inc. (NASDAQ:AKAM) is likely to benefit from a growing customer base, Nominum’s acquisition, improvised portfolio of solutions and robust over-the-top (OTT) content viewing segment.

We also expect the huge level of network traffic catered by the company’s cloud delivery platform to be a key top-line booster in the fourth quarter. (Read More: Akamai to Report Q4 Earnings: What's in the Cards?)

Moreover, Akamai Technologies has a favorable combination of a Zacks Rank #3 (Hold) and Earnings ESP of +2.73%, which shows that the company is likely to deliver a positive surprise this quarter.

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Venice, CA-based Snap Inc. (NYSE:SNAP) is likely to benefit from recently introduced tools and features to boost engagement and user growth.

Snap’s flagship application, Snapchat, is highly popular among teenagers, given its attractive features. However, we anticipate the rate of growth to decline in the fourth quarter, consistent with the trend of the previous three quarters. (Read More: Snap to Report Q4 Earnings: What's in the Cards?)

Further, Snap has an unfavorable combination of a Zacks Rank #3 and Earnings ESP of -8.61%.

Dallas, TX-based Match Group Inc. (NASDAQ:MTCH) is the world’s foremost provider of dating products and operates a portfolio of more than 45 brands. The company is currently enjoying strong growth, driven by robust growth momentum in Tinder, solid performances from Meetic and Match as well as PlentyOfFish.

However, weaker-than-expected ad revenue growth trends might dent the company’s top line in the fourth quarter. (Read More: Will Tinder & PMC Growth Aid Match Group Q4 Earnings?)

Additionally, Match has an unfavorable combination of a Zacks Rank #4 and Earnings ESP of +5.96%.

Oklahoma City- based Paycom Software Inc. (NYSE:PAYC) is expected to benefit from growing demand of its cloud-based solutions across a wide section of verticals. Larger companies have greater and more complex human capital management (HCM) needs. The company’s solution is constantly evolving to serve those.

We expect the company’s fourth-quarter revenues to be positively influenced by elevated recurring revenues and higher traction in cloud-based offerings. However, intense competition from companies likes Paylocity Holding, Intuit (NASDAQ:INTU) and Paychex (NASDAQ:PAYX) is a major headwind. (Read More: Paycom to Report Q4 Earnings: What's in the Cards?)

Paycom has a favorable combination of a Zacks Rank #3 and Earnings ESP of +2.32%.

The Ultimate Software Group Inc. (NASDAQ:ULTI) also has an unfavorable combination of Earnings ESP of -0.93% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Notably, the company’s earnings have beat the Zacks Consensus Estimate in three out of four preceding quarters, with an average positive surprise of 5.01%.

Ultimate Software forecasts recurring revenues between $210 million and $212 million for the fourth-quarter. Total revenues are projected between $242 million and $246 million. Operating margin is expected at approximately 18%.

We believe that declining retention rate primarily due to a client mix-shift to small & medium business (SMB) is likely hurt the company’s top-line growth in the fourth quarter.

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.

See Them Free>>