Today's Earnings Trifecta: Microsoft, Tesla & Ford
This time around, Wall Street analysts expect mixed earnings results, thanks to trade issues and concerns about an economic slowdown. But, today three big-brand American stocks are poised to come up with promising earnings results. These stocks possess stable cash flows and have established business models, which will certainly boost their profit margins.
Let us, thus, take a look at some of the big-brand companies set to beat earnings in one of the busiest earnings stretches this season. It’s worth pointing out that these stocks have a positive Earnings ESP. This is our proprietary methodology for determining stocks that have the best chance to surprise with their next earnings announcement. It provides the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.
Trillion-dollar plus company, Microsoft Corporation MSFT is set to report its first-quarter fiscal 2020 results, after market close. The biggest cloud computing company has impressed investors with solid growth in the past decade. In fact, in the fourth quarter of fiscal 2019, the company’s revenues jumped 12% year over year, courtesy of an uptick in commercial cloud revenues.
During the fiscal fourth quarter, commercial cloud revenues soared 39% year over year. In particular, Azure cloud platform’s revenues climbed 64% annually. Azure’s encouraging growth is expected to have continued in the fiscal first quarter.
Other segments of commercial cloud including Office 365 and Dynamics 365 are also expected to have driven the software giant’s earnings. Needless to say, Microsoft’s commercial Office and Dynamics’ revenues increased 14% and 12%, respectively, on an annual basis in the fiscal fourth quarter.
The PC industry, by the way, is doing pretty well this year. According to research firm IDC, PC shipments increased 3% annually in the third quarter to 70.4 million. Another research firm Gartner also estimated a 1.1% rise in PC shipments to 68.1 million. Thus, it’s expected that Microsoft has made the most of the increase in PC sales in the fiscal first quarter.
Analysts now expect the company’s EPS to increase to $1.25 from $1.14 a year ago. Revenues are expected to jump from $29.08 billion to $32.23 billion. Presently, the company has an Earnings ESP of +0.31%.
Microsoft’s expected earnings growth rate for the current year is 9.7%, in contrast to the Computer - Software industry’s projected decline of 0.5%. What’s more, the company has outperformed the broader industry so far this year (+34.3% vs +29.8%).
Elon Musk’s Tesla, Inc. TSLA will report its third-quarter results after the closing bell. The electric car company has of late shown impressive growth in vehicle sales, mostly driven by its low-cost Model 3. But, the question is whether the low-priced vehicle will be able to single-handily boost the company’s profit margin.
Tesla has announced that it has delivered a record 97,000 vehicles in the third quarter, and almost 80,000 of these vehicles were Model 3. Such figures are, undoubtedly, higher than any other quarter so far. What’s more, production has gone up with nearly 10,000 more vehicles in the second quarter.
Wall Street analysts expect the company’s third-quarter revenues at $6.6 billion. The Zacks Consensus Estimate for third-quarter loss per share has also been narrowed by 2 cents in the past 30 days. And our proprietary model predicts an earnings beat for Tesla this time around. Tesla has an Earnings ESP of +79.68%.
Tesla’s expected earnings growth rate for the current year is 127.8%, way higher than the Automotive - Domestic industry’s projected rally of 1.3%. The company has outpaced the broader industry in the past month (+14.5% vs +4.9%).
Ford Motor Company F is slated to release third-quarter earnings after the closing bell. The iconic U.S. car manufacturer has seen its shares experience a volatile phase, especially after earnings releases this year. Its shares jumped more than 10% after first-quarter earnings release, while the stock lost more than 7% following second-quarter numbers. So, all eyes are now on third-quarter earnings results to track the stock’s movement post release.
Its vehicle sales have slightly declined in the United States this year. Tight supplies of the 2020 Explorer SUV have been cited to be the primary reason behind this decline in sales figures. But, investors shouldn’t worry! Ford stated that sales in the European market, led by Focus, rose 3.1% in the third quarter. In comparison, Ford lost nearly $245 million in the European market in the same period last year.
Ford also stated that its sales in China were up 5% in September from August and 25% compared to July. Most importantly, its Lincoln brand’s September sales jumped 11% and 13% from August and July, respectively.
The promising sales performance hints at a solid third quarter for Ford. The Zacks Consensus Estimate, Ford for the company’s EPS is pegged at 26 cents on revenues of $34.17 billion. Ford currently has an Earnings ESP of +1.74%.
Ford’s expected earnings growth rate for the next year is a steady 3.2%. Most importantly, its stock price has surpassed the Automotive – Domestic industry on a year-to-date basis (+18.5% vs +3.2%).
Microsoft, Tesla and Ford possess a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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