Friday, July 25, 2014
Stocks are indicated to start today's session modestly in the red
after steady gains over the last few days. Corporate profits remain
in the spotlight with the 2014 Q2 season in full swing. The June
Durable Goods Orders reading coming out a little later could also
give the market a directional nudge.
On the earnings front, we now have Q2 results from 226 S&P 500
members that combined account for 53% of the index's total market
capitalization. Total earnings for these 202 companies are up +9.9%
from the same period last year on +5.4% higher revenues, with 69%
beating EPS estimates and 64% coming out with positive revenue
The earnings related spotlight today will likely be from last
evening's reports from
). Amazon lived up to its reputation of sacrificing short-term
profits for long-term growth by coming out with a bigger than
expected loss and weak guidance for the current period. Margins at
the online retailing giant continued to suffer as it pours money
into new offerings and the logistical wherewithal to deliver them.
Amazon shares are indicated to open down in a big way in today's
session. Investors were unimpressed with Starbucks' results as
well, keeping the stock under pressure today.
Beyond the Amazon results, the overall picture emerging from the Q2
earnings season thus far is fairly reassuring: the growth rates are
better, more companies are coming ahead of estimates, and there is
even some modest improvement on the guidance front. With respect to
guidance, the majority of companies providing guidance are still
guiding lower as we saw with Amazon last night, but their
proportion is smaller than what we have been seeing in recent
quarters. And even those that don't offer guidance have been
qualitatively talking up their business outlook.
This modestly improved guidance is starting to have a bearing on
estimates for the current period - and the effect is positive. By
this time in each of the last four reporting cycles, we had started
seeing estimates for the current period come down. But we aren't
seeing that at present. Estimates for 2014 Q3 have held up very
well thus far. In fact, they have moved up a tad since the current
earnings season got underway. This is an improvement over what we
have been seeing in recent quarters.
Director of Research
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