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Key Predictions for Tech Earnings on May 1: STX, AAPL & More

The first-quarter 2018 earnings season is halfway through with 267 S&P 500 members having already reported results. Per the latest Earnings Preview , total earnings for the S&P 500 index are up 25.1% on a year-over-year basis driven by 10% growth in revenues.

Notably, the quarter is on track to record the strongest earnings and revenue growth in seven years. However, positive earnings surprises are tracking low at this stage compared to the previous quarter. Besides, estimates have also failed to increase as much as it did at the start of the reporting cycle.

Overall, first-quarter earnings for S&P 500 companies are anticipated to be up 22.6% from the year-ago quarter on revenues that are estimated to increase 8.4%, compared with 13.4% growth in fourth-quarter earnings on 8.6% higher revenues. Technology is one of the 13 sectors anticipated to report double-digit earnings growth.

Per the report dated Apr 27, 64.7% S&P 500 companies belonging to the Tech sector reported their respective Q1 numbers, wherein earnings for these companies increased 31.3% from the same period last year on 11.4% higher revenues. Notably, 89.3% surpassed revenue estimates and 92.9% outperformed on the bottom line. Stocks from the technology sector are expected to record top-and bottom line growth of 12.5% and 27.9%, respectively.

The sector has been benefiting from strong demand for cloud-based platforms, growing adoption of Artificial Intelligence (AI) solutions, Augmented/Virtual reality devices, autonomous cars, advanced driver assisted systems (ADAS) and Internet of Things (IoT) related software.

The current week (Apr 30-May 4) will see releases from 900 companies, out of which 142 companies are S&P 500 members. Here we take a look at five technology companies that are set to report on May 1.

Dublin, Ireland-based, Seagate Technology PLCSTX is likely to benefit from improving HDD demand and strong product portfolio.

We also expect PC market stabilization to aid the shipments of the company in the quarter. (Read more: Is a Beat in the Cards for Seagate in Q3 Earnings? ).

Moreover, Seagate has a favorable combination of a Zacks Rank #1 (Strong Buy) and positive Earnings ESP of +3.43%, which indicates that the company is likely to deliver a positive surprise this quarter. You can see the complete list of today's Zacks #1 Rank stocks here .

Seagate Technology PLC Price and EPS Surprise

Seagate Technology PLC Price and EPS Surprise | Seagate Technology PLC Quote

According to the Zacks model, a company with a Zacks Rank #1, 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or 5 (Strong Sell) are best avoided.

You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

On the other hand, AppleAAPL has an unfavorable combination of a Zacks Rank #4 and an Earnings ESP of -0.23% ahead of its second-quarter fiscal 2018 results.

Lackluster sales of the premium iPhone X resulted in a decline in sales estimates, which remains the major concern this quarter. However, Apple's aggressive pricing policy is likely to boost the top line, despite lower shipments. (Read more: Apple Q2 Earnings: Key Aspects to Watch Out For ).

Nonetheless, we note that Apple's results compared favorably with the Zacks Consensus Estimate in the trailing four quarters, resulting in an average positive surprise of 5.72%.

Apple Inc. Price and EPS Surprise

Apple Inc. Price and EPS Surprise | Apple Inc. Quote

Snapchat's parent SnapSNAP too is unlikely to beat first-quarter 2018 estimates as it has an unfavorable combination of an Earnings ESP of -3.79% and a Zacks Rank #3

Although the growing popularity of Snap's messaging application among teenagers is a positive, the quarter witnessed investors' anxiety over a number of reasons, with redesign taking center stage.

The redesign of the Snapchat app faced criticism and there has been growing tension among investors as to whether it would have an adverse impact on the company's ad business, given the competitive environment in which it operates. (Read more: Snap to Report Q1 Earnings: Disappointment in Cards? ).

Snap Inc. Price and EPS Surprise

Snap Inc. Price and EPS Surprise | Snap Inc. Quote

Windsor, CT-based SS&C Technologies Holdings Inc.SSNC is a provider of investment and financial management software and related services focused exclusively on the financial services industry. The company also has an unfavorable combination of a Zacks Rank #3 and an Earnings ESP of -0.93%.

Notably, the company beat the Zacks Consensus Estimate once and matched it thrice in the trailing four quarters, with an average positive surprise of 0.47%.

SS&C Technologies Holdings, Inc. Price and EPS Surprise

SS&C Technologies Holdings, Inc. Price and EPS Surprise | SS&C Technologies Holdings, Inc. Quote

Ottawa, Canada-based ShopifySHOP also has an unfavorable combination of a Zacks Rank #3 and an Earnings ESP of -21.74%

Shopify's merchant focus strategy and strong partner referral system is expected to expand its customer base. However, increasing investments on product development, infrastructure and platform and lack of significant presence in the Asia Pacific market, pose concerns.

However, the company beat the Zacks Consensus Estimate in all the preceding four quarters, delivering an average positive surprise of 174.84%.

Shopify Inc. Price and EPS Surprise

Shopify Inc. Price and EPS Surprise | Shopify Inc. Quote

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Seagate Technology PLC (STX): Free Stock Analysis Report

Shopify Inc. (SHOP): Free Stock Analysis Report

Snap Inc. (SNAP): Free Stock Analysis Report

Apple Inc. (AAPL): Free Stock Analysis Report

SS&C Technologies Holdings, Inc. (SSNC): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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