Lower estimates show that the biggest tech companies have already priced in a lot of bad news.
This could be the most important earnings week because Alphabet, Microsoft, Meta, Apple, and Amazon all report.
This quarter, there are three important things to know about earnings:
1. Earnings from the S&P are down, but overall profits are still up because energy companies had another big quarter of profits.
The S&P 500’s earnings are down, but they are still good.
Q3: +3.1%
ex-Energy: – 3.5%
Q4: +4.4%
Source: Refinitiv
2. Most companies continue to beat estimates by a comfortable amount, but at a slightly lower rate than in the last four quarters.
About three out of four companies are doing better than expected by an average of 5.4%. This is good, but not as good as the last four quarters, which were very good.
Earnings for Q3 so far
(20% of resporting)
Beat: 74.7%
Last 4 quarters: 78.1%
Average beat: 5.4%
Last 4 quarters avg beat: 7%
Source: Refinitiv
The average over the last four quarters has been 7%.
The source is Refinitiv.
3. Earnings estimates for the growth industries of technology and communication services have already been cut and are now in the red.
Estimations of earnings in technology
Q3: -3.4%
Q4: -1.0%
Services for communication:
Q3: -15.5%
Q4: -11.4%
All of the Big Five tech companies have seen their earnings estimates go down for the third and fourth quarters, with Meta and Amazon seeing the biggest drops.
Trends in Q3 big cap tech earnings
(decline in estimates since 6/30).
Microsoft: – 8%
Apple: – 2%
Alphabet: – 10%
Meta: – 30%
Amazon: – 40%
The bottom line is that some of the biggest tech stocks already reflect a lot of bad news.
