Earnings season continues to fade, with the vast majority of S&P 500 companies already delivering quarterly results. Overall, the Q2 cycle was primarily positive, with the market eluding the earnings meltdown many had feared.
As usual, many stocks soared following better-than-expected results, including heavyweights Amazon AMZN, Alphabet GOOGL, and Caterpillar CAT. Amazon and Alphabet shares have been big-time outperformers in 2023, whereas Caterpillar shares have modestly lagged.
Given the strong market reactions post-earnings, what was there to like? Let’s take a closer look at each.
Amazon
Amazon’s quarterly results came in nicely above expectations, exceeding the Zacks Consensus EPS Estimate by more than 80% and reporting revenue 2% ahead of expectations. Earnings jumped from the year-ago period, whereas revenue climbed 11% year-over-year.
In addition, Amazon Web Services (AWS) sales climbed 12% from the year-ago period to $22.1 billion, exceeding the Zacks Consensus Estimate by roughly 3%. AWS growth has undoubtedly cooled, but the segment’s significance can’t be understated, as it represented 70% of the company’s operating income throughout the period.
And to top it off, the e-commerce titan had its biggest Prime Day event ever in mid-July, selling more than 375 million items and reflecting a resilient consumer. Following the release, analysts have taken their expectations higher across all timeframes, landing Amazon into the highly-coveted Zacks Rank #1 (Strong Buy).
Alphabet
Alphabet’s 2023 Q2 results were aided by continued resilience in Search and a recent acceleration in YouTube revenue growth, with the tech titan exceeding the Zacks Consensus EPS Estimate by 9%. Revenue throughout the period totaled $62.1 billion, 8% higher year-over-year.
Google Cloud revenues totaled $8.0 billion, improving by a solid 28% from the year-ago period. In addition, advertising revenue reached $58.1 billion, reflecting a 3% improvement. And the company remains a cash-generating machine; operating cash flow totaled $28.7 billion, whereas free cash flow reached $21.8 billion.
Like AMZN, analysts have taken their earnings expectations higher after the release.
It’s worth mentioning that GOOGL shares aren’t expensive given the company’s growth trajectory, with the current 23.1X forward earnings multiple (F1) sitting beneath the 24.6X five-year median and highs of 26.8X in 2022. Earnings are forecasted to climb 25% on 9% higher sales in its current year.
Caterpillar
Caterpillar shares also saw momentum following its recent print, with the company exceeding the Zacks Consensus EPS Estimate by 23% and reporting sales 5% ahead of expectations thanks to higher sales volume and positive price realization. Earnings saw 75% growth year-over-year, whereas revenue climbed 20%.
The company’s sales have recovered nicely from pandemic lows.
Caterpillar’s profitability improved in a big way, with an operating profit margin of 21.1% well above the 13.6% reported in the comparable period last year. The company also purchased $1.4 billion of CAT stock and paid $600 million in dividends throughout the period, reflecting the company’s shareholder-friendly nature.
To little surprise, analysts took their earnings expectations higher post-earnings, pushing CAT into a Zacks Rank #1 (Strong Buy).
Bottom Line
Earnings season always delivers surprises, and it was no different during the 2023 Q2 cycle.
All three companies above – Amazon AMZN, Alphabet GOOGL, and Caterpillar CAT – positively surprised investors, with shares of each seeing buying pressure post-earnings thanks to favorable results.
And to little surprise, all have enjoyed positive earnings estimate revisions following the better-than-expected results.
Amazon.com, Inc. (AMZN): Free Stock Analysis Report
Caterpillar Inc. (CAT): Free Stock Analysis Report
Alphabet Inc. (GOOGL): Free Stock Analysis Report
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