Q2 Scorecard and Research Reports for Apple, AT&T & Target
Tuesday, July 28, 2020
The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily provides a real-time update on the ongoing Q2 earnings season, in addition to featuring new research reports on 16 major stocks, including Apple (AAPL), AT&T (T) and Target (TGT). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Q2 Earnings Season Scorecard
Including all this morning's releases, we now have Q2 results 163 S&P 500 members or 32.6% of the index's total membership. Total earnings or aggregate net income for these 163 index members are down 38.6% on -6.3% lower revenues, with 75.5% beating EPS estimates and 64.4% beating revenue estimates.
The proportion of these companies beating EPS and revenue estimates is tracking above what we had seen from the same group in the preceding quarter.
For Q2 as a whole, combining the actual results that have come out with estimates for the still-to-come companies, S&P 500 earnings are expected to be down -42% on -9.3% lower revenues.
As we have been pointing out lately, the revisions trend remains positive, with estimates for 2020 Q3 and beyond steadily improving. For mroe details about the evolving earnings picture, please check out weekly Earnings Preview article >>> The Technology Sector Shows its Earnings Power
Today's Featured Reports
Apple shares have lost some ground in recent days, but the stock has otherwise been standout outperformer, up +80.8% over the past year vs. +7.7% for the S&P 500 over the past year (+80.8% vs. +7.7%). The Zacks analyst believes that the company is benefiting from a continued momentum in the Services segment, driven by strong App Store sales and the robust adoption of Apple Music and Apple Pay. The company is reporting Q2 results after the market's close on Thursday, July 30th.
Non-iPhone devices, particularly Apple Watch and AirPod, are other notable drivers in the long haul. However, iPhone sales are expected to remain bleak in the near term due to the negative impact of the coronavirus.
In fact, the company expects iPhone and Wearables business revenues for the fiscal second quarter to be worse on a year-over-year basis than the fiscal first quarter. On the contrary, iPad and Mac revenues are expected to improve but lower economic activity will hurt AppleCare and advertising businesses. The company didn’t provide any guidance due to the pandemic-triggered uncertainty.
Shares of AT&T have lost -20.9% over the three six months against the Zacks Wireless National industry’s fall of -2.8%. The Zacks analyst believes that AT&T is well placed to benefit from streaming services of HBO Max. The company is committed to a three-year financial framework with sustained investments and debt-reduction efforts.
AT&T reported mixed second-quarter 2020 results with adjusted earnings surpassing the Zacks Consensus Estimate and revenues missing the same as coronavirus hit top-line growth, limiting future visibility. The company is witnessing a steady decline in linear TV subscribers, legacy services and wireline division. As it tries to woo customers with discounts, freebies and cash credits, margins tend to fall.
AT&T intends to deploy a standards-based, nationwide mobile 5G network to spur growth. The company expects to gain a competitive edge through edge computing services that offer the flexibility to better manage data traffic.
Target shares have gained +9.5% over the past six months against the Zacks Discount Stores industry’s rise of +5%. The Zacks analyst believes that Target’s initiatives, including the development of omni-channel capacities, diversification and localization of assortments along with emphasis on flexible format stores, bode well.
It has also adopted cost reduction strategy, rationalization of supply chain and technology and process improvements. These position the company to address the challenges related to the pandemic.
Notably, higher sales in Essentials and Food & Beverage categories with solid contribution from digital channel have been fueling Target’s top line. While these raises optimism, we cannot overlook margins. Investments in pay and benefits, shift in channel mix toward digital fulfillment and decline in the sales of higher-margin discretionary items are likely to keep margins under pressure.
Other noteworthy reports we are featuring today include Honeywell International (HON), Boeing (BA) and 3M Company (MMM).
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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
Per the Zacks analyst, strength in Honeywell's Intelligrated and warehouse automation business units will lend momentum to the company.
Per the Zacks analyst, favorable U.S. defense budget has been boosting Boeing's growth.
Per the Zacks analyst, 3M will benefit from the buyout of Acelity and its KCI subsidiaries, which has been fortifying its medical solutions business.
Per the Zacks analyst, American Electric invests heftily in operations which should enable it to achieve its long-term earnings growth target.
The Zacks analyst believes revenue diversification efforts and planned investment in new capital projects in Macao bode well for Las Vegas Sands.
Per the Zacks analyst, ANSYS is benefiting from its expanding portfolio of simulation solutions, product enhancements and acquisitions.
Per the Zacks analyst, business servicing wins, synergies from strategic buyouts and global footprint will continue to aid State Street's revenues amid near-zero rates and tough operating backdrop.
The Zacks analyst expects Deere to gain from cost-reduction initiatives, growing U.S farm income and investment in new products with advanced technologies.
Over the past five years, the stock has traded as high as 23.6X and as low as 14.3X, with a 5-year median of 18.1X.
The Zacks Analyst likes the extensive range of technology solutions in the form of cloud-based applications and related services.
Per the Zacks analyst, temporary U.S. and European store closures due to coronavirus has been a concern for TJX Companies. Incidentally, this dented the company's first-quarter performance.
Per the Zacks analyst, significant decline in commercial air travel owing to coronavirus pandemic has been hurting Heico. Expansion of tariff on aluminum import may push up costs for the company.
Per the Zacks Analyst, Taubman Centers' near-term performance will be marred by outstanding rental revenue receivables from tenants, store closures and retailer bankruptcies amid low mall traffic.
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ATT Inc. (T): Free Stock Analysis Report
3M Company (MMM): Free Stock Analysis Report
Honeywell International Inc. (HON): Free Stock Analysis Report
The Boeing Company (BA): Free Stock Analysis Report
Apple Inc. (AAPL): Free Stock Analysis Report
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