Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Apple AAPL, Amazon AMZN, Starbucks SBUX, and Uber UBER.

Green Shoots Emerging from the Earnings Landscape

With a little over half of June-quarter results already out, we can confidently call the overall earnings picture reassuringly stable and resilient.

Earnings aren’t great, but no one expected them to be so. Instead, many in the market feared a material deterioration in the outlook that would show up in negative guidance and lowered estimates. While we have seen a few reports with downbeat guidance, the overall tone and substance of guidance and management commentary have been favorable.

The net effect of this is a very stable earnings outlook, even though estimates in the aggregate are still coming down due to a weakening revisions trend for the Energy sector.

You can see this by comparing earnings estimates for 2023 Q3 as well as full-year 2023 today to where they stood at the start of July and April.

The expectation today is for 2023 Q3 earnings to be down -2.1% from the same period last year on +0.2% higher revenues. If we exclude the Energy sector, Q3 earnings would be up +3.3% on +3% higher revenues.

One month ago, on June 27^th, the expectation was for Q3 earnings to be down -1.4% on +0.7% higher revenues. Q3 earnings were expected to be up +3.4% on an ex-Energy basis on June 27^th.

Four months back, on March 29^th, the expectation was for Q3 earnings to be up +0.6% on +0.7% higher revenues. Q3 earnings were expected to be up +4.4% on an ex-Energy basis on March 29^th.

This discussion of evolving aggregate Q3 earnings estimates reflects that while analysts have cut their estimates for the period, a big part of the negative revisions is due to the Energy sector.

While estimates in the aggregate for the remaining 15 sectors of the S&P 500 index are essentially unchanged over the past month, there are plenty of cross-currents at the individual sector levels. Specifically, estimates for the Tech, Construction, Autos, Transportation, and Utilities sectors have increased while the same for the other sectors have modestly come down.

Regular readers of our earnings commentary would be familiar with these revisions trends, as we have been flagging them since the start of 2023 Q2. We noticed a significant stabilization in the revisions trend since the beginning of April, which was in contrast to the persistently negative revisions trend that had been in place for about a year prior.

Q2 is on track to be the third consecutive quarter of earnings declines and the first quarter of declining revenues. As noted earlier, a big part of the earnings and revenue weakness is due to the Energy sector. Excluding the Energy sector drag, Q2 earnings would be down -2.9% on +3.6% higher revenues.

2023 Q2 will be the 6^th consecutive quarter of declining margins for the S&P 500 index.

Margins in Q2 are expected to be below the year-earlier level for 10 of the 16 Zacks sectors, with the biggest margin pressure expected to be in the Energy, Medical, Basic Materials, and Construction sectors.

With the earnings focus lately on the Tech sector, it is instructive to see how much distance has been covered on the margins front in this vital sector.

On the positive side, margins are on track to be above the year-earlier level for six sectors, with notable gains in the Consumer Discretionary, Finance, and Transportation sectors.

As noted earlier, the estimate revisions trend has notably stabilized since the start of Q2. In the aggregate, S&P 500 earnings estimates for 2023 have declined -1.6% since the beginning of April but only -0.5% on an ex-Energy basis. Importantly, estimates for sectors like Tech, Construction, Autos, and Transportation have increased in that timeframe.

We see this favorable turn in the revisions trend as green shoots in the overall earnings landscape and indicative of better days ahead.

Q2 Earnings Scorecard

As of Friday, July 28^th, the Q2 earnings season crossed the halfway mark, with results from 254 S&P 500 members already out. We have a full reporting docket this upcoming week, with more than 1100 companies reporting results, including 169 S&P 500 members. By the end of this week, we will have seen Q2 results from almost 85% of the index members.

The notable companies reporting this week include Apple, Amazon, Starbucks, Uber and others.

Apple’s Q2 earnings are expected to be -4.1% below the year-earlier level on -2% lower revenues. The stock has been a standout performer this year, up +50.1% vs. +19.4% for the S&P 500 index. It has been a while since Apple shares were down following a quarterly release. In fact, the last time the stock reacted negatively to a quarterly release was two years ago, in July 2021.

Uber, which reports before the market’s open on Tuesday, August 1^st, has done even better than Apple this year, up +95.6% in the year-to-date period. This is expected to be a milestone quarter for Uber, with the current consensus EPS estimate at breakeven, up from the year-earlier period’s -$1.33 loss.

Total Q2 earnings for the 254 S&P 500 members are down -3.4% from the same period last year on +1.7% higher revenues, with 80.3% beating EPS estimates and 64.6% beating revenue estimates.

The Apple release after the market’s close on Thursday, August 3^rd, will keep the Tech sector in focus this week as well. Through Friday, July 28^th, we have seen Q2 results from 52% of the sector’s total market capitalization in the index. Total earnings for these Tech companies are up +0.4% from the same period last year on +1.5% higher revenues, with 93.8% beating EPS estimates and 75% beating revenue estimates.
Amazon.com, Inc. (AMZN): Free Stock Analysis Report

Apple Inc. (AAPL): Free Stock Analysis Report

Starbucks Corporation (SBUX): Free Stock Analysis Report

Uber Technologies, Inc. (UBER): Free Stock Analysis Report

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