Q3 Earnings Scorecard and Analyst Reports for Apple, Abbott, IBM & Others

Monday, October 17, 2022

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 Apple Inc. (AAPL), Abbott Laboratories (ABT) and International Business Machines Corporation (IBM). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.

You can see all of today’s research reports here >>>

Q3 Earnings Season Scorecard

Including this morning's results, we now havre Q3 results from 38 S&P 500 members that combined account for 10.7% of the index's total market capitalization. Total earnings for these 38 index members are down -4.7% from the same period last year on +9.4% higher revenues, with 76.3% beating EPS estimates and 57.9% beating revenue estimates.

For the Finance sector which has an outisize weightage in the results at this stage, we now have results from 32.3% of the sector's market capitalization in the S&P 500 index. Total Q3 earnings for these banks and brokers are down -12.3% from the same period last year on +5.2% higher revenues, with 91.7% beating EPS estimates and 66.7% beating revenue estimates. The proportion of these banks that have been beaten both EPS and revenue estimates is 66.7%.

This is a better showing from these Finance sector companeis relative to what we have seen from the group in other recent periods. The 'blended' 66.7% beats % for this group of Finance sector companies compares to a low of 33.7%, high of 83.3% and average of 58.3% over the preceding 20 quarters (5 years).

In other words, the Finance sector has given a better-than-expected start to this earnigns season.

Today's Featured Research Reports

Apple shares have declined -3.3% over the past year against the S&P 500 index's -21.2% and decline and the -37.3% pullback in the Zacks Tech sector.

While there are undoubtedly some challenges for Apple on the near-term horizon as a result of the evolving uncertain macro backdrop, it should continue to benefit from continued momentum in the Services and robust performance from iPhone, Mac, Wearables and an expanding App Store ecosystem.

The latest iPhone 14 models are witnessing high pre-order which is expected to drive top-line growth. We expect Apple’s fiscal 2022 revenues to increase 7.3% year over year with Services growing 14.1%.. 

On the flip side, Apple has a growing exposure to the uncertain Chinese market. The company’s services revenue growth is expected to be lower than the June quarter due to challenging macroeconomic conditions and unfavorable forex.

Also, Apple did not provide revenue guidance for the fourth quarter of fiscal 2022. Apple expects year-over-year revenue growth to accelerate during the fiscal fourth quarter on a sequential basis, despite approximately 600 basis points of unfavorable year-over-year impact from forex.

(You can read the full research report on Apple here >>>)
Abbott Laboratories shares have declined -11.7% over the past year against the Zacks Medical - Products industry’s decline of -49.2%. The company’s total worldwide Nutrition and Pediatric Nutrition sales continued to be hampered due to the negative repercussions of a voluntary recall of certain powder formulae produced at one of Abbott's U.S. plants. Decline in organic sales in the Neuromodulation and Vascular businesses in the second quarter also raise apprehension.

However, Abbott exited the second quarter of 2022 with better-than-expected earnings and revenues. The top line benefitted from robust organic sales growth across core operating segments, barring Nutrition.

The Diabetes Care business continued to benefit from the growing sales of sensor-based continuous glucose monitoring system, FreeStyle Libre. We are particularly upbeat about the receipt of FDA clearance for the company’s FreeStyle Libre 3 system in May 2022.

(You can read the full research report on Abbott Laboratories here >>>)

IBM shares have declined -13.7% over the past year against the Zacks Computer - Integrated Systems industry’s decline of -21.0%. The company is facing stiff competition in the cloud computing market from the likes of Amazon Web Services and Microsoft Azure. Higher debt levels amid extensive restructuring activities pose a concern for the company.

High integration risk from continuous acquisition spree is another headwind. Muted cash flow outlook for 2022 due to the impact of dollar strength and winding down of business operations in Russia remain another downside for IBM. However, synergies from the Red Hat buyout are bolstering its competitive position in the hybrid cloud market.

IBM’s growth is expected to be driven primarily by analytics, cloud computing, and security in the long haul. A combination of a better business mix, improving operating leverage through productivity gains and increased investment in growth opportunities will likely drive profitability.

(You can read the full research report on IBM here >>>)

Other noteworthy reports we are featuring today include Equinor ASA (EQNR), The Estée Lauder Companies Inc. (EL), and The Progressive Corporation (PGR).

Sheraz Mian
 
Director of Research

Note: Sheraz Mian heads the Zacks Equity Research department and is a well-regarded expert of aggregate earnings. He is frequently quoted in the print and electronic media and publishes the weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here>>>

Today's Must Read

Robust Portfolio, Services Strength to Benefit Apple (AAPL)

Abbott (ABT) Thrives on Procedure Volume Gain, iCGM Launch

IBM Rides on Solid Business Mix, Healthy Productivity Gains

Featured Reports

The Estee Lauder Companies (EL) Benefits From Online Business
Per the Zacks analyst, The Estee Lauder Companies is gaining on solid online sales. For fiscal 2022, online channel grew mid single-digits organically fueled by double-digit growth in Asia-Pacific.

Progressive's (PGR) Solid Policies in Force Aid, Cat Loss Ail
Per the Zacks analyst, Progressive is set to grow on, solid policies in force, competitive rates and leadership position. However, cat loss exposure inducing underwriting volatility ails.

McKesson's (MCK) Deals Buoys Optimism Amid Sluggish Market
Per the Zacks analyst, McKesson has been pursuing acquisitions and divestures to drive growth for its pharmaceutical distribution business, a targeted market that has sluggish growth rate.

Strength in Electrification Segment Aids ABB Amid High Costs
Per the Zacks analyst, strength in ABB's Electrification segment owing to strong customer activity should drive its growth. However, high operating costs remain a concern.

Fidelity National (FIS) Solid on Top-Line Growth, Buyouts
Per the Zacks analyst, strong performance of the company's Merchant Solutions segment is driving revenues. Acquisitions continue to boost its presence across several regions.

Beer Business to Boost Constellation Brands' (STZ) Feat
Per the Zacks analyst, Constellation Brands is gaining from strength in beer business on solid demand, particularly in Modelo Especial and Corona Extra. This led to beer sales growth of 15% in Q2.

Solid Investments Aid DTE Energy (DTE), Weak Solvency Woes
Per the Zacks analyst, DTE Energy's investment in infrastructure and expansion projects tend to boost its long-term growth prospects. However, its weak solvency position remains a bottleneck.

New Upgrades

Equinor (EQNR) to Benefit From Rising Clean Energy Demand
The Zacks analyst is impressed by Equinor's massive investments in renewable projects, comprising solar and wind energy. With this, the company can capitalize on the rising clean energy demand.

H&R Block (HRB) Benefits From Block Horizons 2025 Strategy
Per the Zacks analyst, Block Horizons strategy is expected to help H&R Block deliver sustainable revenues, operating profit growth, improve return on investments and maintain solid liquidity.

Sports Betting Expansion to Boost Boyd Gaming (BYD) Prospects
Per the Zacks analyst, Boyd Gaming is likely to benefit from its interactive gaming platform, FanDuel partnership and expansion initiatives. Also, focus on streamlining of cost structure bodes well.

New Downgrades

Sarepta's (SRPT) Overdependence on DMD Drugs a Woe
Though Sarepta Therapeutics has a strong commercial portfolio of drugs targeting DMD indication, the Zacks Analyst is concerned about the company's dependence on a single target market for revenues.n

Low Stream Volumes & Metal Prices to Hurt Royal Gold (RGLD)
The Zacks analyst is concerned that the Royal Gold's results will bear the brunt of lower stream segment sales and the recent downtrend in gold, copper and silver prices.

Challenging Market, Rising Expenses Hurt Franklin (BEN)
Per the Zacks analyst, challenging operating backdrop and geopolitical concerns might affect assets under management (AUM) for Franklin. Rising costs are likely to impede the bottom line.

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Abbott Laboratories (ABT) : Free Stock Analysis Report
 
Apple Inc. (AAPL) : Free Stock Analysis Report
 
International Business Machines Corporation (IBM) : Free Stock Analysis Report
 
The Estee Lauder Companies Inc. (EL) : Free Stock Analysis Report
 
The Progressive Corporation (PGR) : Free Stock Analysis Report
 
Equinor ASA (EQNR) : Free Stock Analysis Report
 
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