The Q3 earnings season is drawing to a close and we now have a much clearer picture with results from 445 S&P 500 companies (91% of the index’s total membership) already out.
Approximately 72.7% posted positive earnings surprises, while 55.4% have beaten top-line expectations. According to the latest Earnings Preview report, earnings of these companies are up 3.9% from the same period last year, while revenues have increased 2.7%.
The trend this earnings season indicates that we may finally see a positive earnings picture after five straight quarters of decline. The report projects that earnings for the total S&P 500 companies will improve 3.4% from the year-ago period, while total revenue will grow 1.5%.
Technology Sector in Focus
Talking about the technology sector, 88.8% of the sector’s total market capitalization in the S&P 500 index has already reported results. Total earnings of these tech companies are up 6.1% from the same period last year on 3.4% higher revenues, with 84% beating earnings estimates and 76% surpassing revenue expectations.
Apple Inc.’s AAPL dismal results proved to be a drag on the overall performance of the sector. The company’s Q3 earnings were down 19% from the same period last year on 9% lower revenues.
Let’s see what’s in store for two electronic stocks, which are expected to release quarterly numbers on Nov 15.
Technology leader and the world’s premier measurement company Agilent Technologies A is unlikely to beat fourth-quarter fiscal 2016 earnings estimates as it has a Zacks Rank #4 (Sell) and an Earnings ESP of -1.92%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
This is because, as per our proven model, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 to beat earnings. Conversely, we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
However, we note that Agilent’s decision to divest or wind up underperforming businesses has helped it to focus on the new Agilent for a solid recurring revenue base and diversification of geographic and industrial operations for growth. Also, the company’s focus on aligning investments for more attractive growth avenues and innovative product launches is a positive and give it an edge over competitors such as Veeco Instruments VECO, Seiko Instruments and Zygo Corp.
In addition, Agilent’s broader portfolio and increased focus on segments with higher growth potential could drive revenue and margins in the to-be reported quarter.
Notably, Agilent’s results compared favorably with the Zacks Consensus Estimate in the last four quarters, with an average beat of 7.61%. Last quarter, the company posted a 4.26% positive surprise.
AGILENT TECH Price and EPS Surprise
Similarly, we don’t expect Active Power Inc. ACPW, a leading designer, manufacturer and seller of Uninterruptible Power Supply (UPS) systems to post an earnings beat in third-quarter 2016 as it has an Earnings ESP of 0.00% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Active Power’s results did not compare favorably with the Zacks Consensus Estimate in the last four quarters and it posted an average negative earnings surprise of 78.34%. However, last quarter, the company posted a 33.33% positive surprise.
ACTIVE POWER Price and EPS Surprise
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