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 Q3 earnings season and new research reports on 16 major stocks, including Microsoft Corporation (MSFT), Novo Nordisk A/S (NVO), and Lowe’s Companies, Inc. (LOW). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Q3 Earnings Season ScorecardIncluding all the reports that came out this morning, we now have Q3 results from 209 S&P 500 members or 41.8% of the index’s total membership. Total earnings for these 209 index members are up +11.1% from the same period last year on +4.4% higher revenues, with 80.4% beating EPS estimates and 63.2% beating revenue estimates.This is a notably improved earnings growth trend for this group of 209 index members than we have seen since 2021 Q4. The Q3 revenue growth pace for this group of companies is in-line with the decelerating growth trend that has been in place in 2021 Q4.With respect to the Q3 beats percentages, the EPS beats percentage of 80.4% for this group of 209 index members is unchanged from what we had seen in each of the last two reporting cycles, but otherwise modestly above the average for the last 20 quarters or 5 years of 79.1%.The Q3 revenue beats percentage of 63.2% is the lowest since the 61.7% for this group of companies in 2020 Q1. The Q3 revenue beats percentage of 63.2% compares to the 5-year low for this group of 209 index members of 56.9% in 2019 Q1 and 5-year average of 69.6%.Looking Q3 as a whole, combining the actual words that have come out with estimates for the still-to-come companies, total S&P 500 earnings are now expected to be up +0.5% on +1% higher revenues. This is the first time quarterly earnings are on track to be positive after three back-to-back quarters of declines for the S&P 500 index. For more details about the Q3 earnings season and evolving expectatioans for the coming periods.
Today’s Featured Analyst Reports
Microsoft shares have outperformed the Zacks Computer – Software industry over the year-to-date period (+43.0% vs. +38.4%), with the performance expected to continue following the company’s better-than-expected Q3 results. The company continues to gain from strong Intelligent Cloud and Productivity and Business Processes revenues. Intelligent Cloud revenues were driven by growth in Azure and other cloud services.
Productivity and Business Processes revenues rose due to a strong adoption of Office 365 Commercial solutions. Continued momentum in the small and medium businesses, frontline worker offerings and a gain in revenue per user drove the top line. Steady growth in Dynamics products and cloud services aided LinkedIn revenues.
However, continued customer shift to cloud offerings is hurting growth in Office’s commercial licensing revenues. Higher operating expenses driven by marketing, LinkedIn and cloud engineering amid intense competition in the cloud space remain a concern.
Shares of Novo Nordisk have outperformed the Zacks Large Cap Pharmaceuticals industry over the year-to-date period (+45.3% vs. +7.2%). The company has one of the broadest diabetes portfolios in the industry. Ozempic and Rybelsus have been performing well in the market. Saxenda and Wegovy sales have been gaining momentum.
Label expansions of diabetes and obesity care drugs will likely further boost sales. Novo Nordisk recently raised its 2023 view due to higher demand for diabetes drug Ozempic and obesity drug Wegovy. Its diversifying efforts to develop new treatments are also encouraging.
However, competition is getting stiffer from pharma bigwigs like Pfizer, who are likely to eat away from Novo Nordisk’s Diabetes care market share, due to serious supply constraints in international markets. Patent expiry and pricing pressure across the diabetes market also remain a woe. Estimates have increased ahead of the Q3 earnings release.Lowe shares have underperformed the Zacks Building Products – Retail industry over the year-to-date period (-4.6% vs. -4.0%). The company’s outlook reflects the ongoing challenges associated with big ticket discretionary spend and general economic concerns. For the third quarter, the company expects to face challenging year-over-year comparison.
Despite this beat, Lowe’s maintained its fiscal 2023 view. It anticipates a 2-4% decline in comps, with a 150-basis point impact from lumber deflation. However, Lowe’s is well positioned to capitalize the demand in the home improvement market, thanks to its investments in technology and the robust Pro business segment.
In the second-quarter fiscal 2023, the company posted better-than-expected results, benefiting from strong margins stemming from gains from the Total Home strategy, a sturdy spring recovery and the execution of the Perpetual Productivity Improvement initiative.
Other noteworthy reports we are featuring today include HSBC Holdings plc (HSBC), Pioneer Natural Resources Company (PXD), and Ecolab Inc. (ECL).More By This Author:Previewing Big Tech Earnings: What Can Investors Expect?
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