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Q4 Earnings Season Scorecard and Analyst Reports for Apple, Meta & Mastercard

Tuesday, January 31, 2023

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 Q4 earnings season and new research reports on 16 major stocks, including Apple Inc. (AAPL), Meta Platforms, Inc. (META) and Mastercard Incorporated (MA). 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 >>>

Q4 Earnings Season Scorecard

Including all the reports that came out before the market's open this morning (January 31st), we now have Q4 results from 167 S&P 500 membrers or 33.4% of the index's total membership.

Total earnings for these companies are up +2.1% from the same period last year on +7.5% higher revenues, with 73.1% beating EPS estimates and 68.9% beating revenue estimates.

The growth pace for these 167 index members, for earnings as well as revenues, is in-line with the expected decelerating trend. That said, there is a divergence between the Q4 EPS and revenue beats percentages, with revenue beats about in-line with historical trends but EPS beats on the low side.

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Looking at Q4 as a whole, combining the actual results that have come out with estimates for the still-to-come companies, S&P 500 earnings are on track to be down -6.3% from the same period last year on +4.7% higher revenues.

For the current peirod (2023 Q1), S&P 500 earnings are currently expected to be down -6.2% on +2.3% higher revenues. Estimates for the period have been coming down, with the current -6.2% expected decline down from -4% on January 6th and -2.9% in mid-December 2022.

This could change as go through the remainder of this reporting cycle. But at this stage in the Q4 earnings season, the magnitude of negative revisions isn't of the level that many in the market appeared to fear a few weeks back. It is primarily in this context that the Q4 earnings season has proven, at this stage at least, to be better than feared.

Today's Featured Analyst Reports

Shares of Apple have held up better than the broader Tech sector over the past year (-18% vs. -23.9% for the Zacks Tech sector), but have lagged the broader market (-18% vs. -13% for the S&P 500 index). The company’s holiday season iPhone shipments are expected to suffer from disruptions at its Chinese partner Foxconn’s factory in Zhengzhou. The Zacks analyst expects Apple to ship roughly 70 million iPhones in the first quarter of fiscal 2023.

The company expects year-over-year revenue growth to decelerate in the fiscal first quarter compared with the fiscal fourth quarter due to unfavorable forex. Mac revenues are expected to be negatively impacted by forex. Apple expects Mac revenues to decline substantially year over year during the December quarter.

Services revenue growth is expected to be negatively impacted by challenging macroeconomic conditions, unfavorable forex, as well as weakness in digital advertising and gaming. Nevertheless, a growing subscriber base in the Services business and a strong liquidity position are key catalysts.

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

Shares of Meta Platforms have underperformed the Zacks Internet - Software industry over the past year (-53.9% vs. -48.0%). The company is suffering from challenging macroeconomic conditions that is negatively impacting its advertising spending. Unfavorable forex, targeting and measurement headwinds due to Apple’s iOS changes, normalization of e-commerce after the pandemic peak and higher inflation hurt growth in the reported quarter.

User base in Europe declined in the reported quarter. Meta’s fourth-quarter guidance reflects macroeconomic and forex concerns. Weak advertising demand is a headwind. Meta expects Reels to monetize much slower than feed or stories. Shares have underperformed the industry in the past year.

However, Meta is benefiting from steady user growth across all regions, particularly Asia Pacific. Increased engagement for its products like Instagram, WhatsApp, Messenger and Facebook has been a major growth driver.

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

Shares of Mastercard have declined -5.3% over the past year against the Zacks Financial Transaction Services industry’s decline of  -10.8%. The company’s steep operating expenses might stress margins. High rebates and incentives may weigh on net revenues. Its dividend yield is still lower than the industry average. As such, the stock warrants a cautious stance.

However, Numerous acquisitions are helping the company to grow addressable markets and drive new revenue streams. The COVID-19 crisis accelerated the adoption of digital and contactless solutions, providing an opportunity for MA's business to expedite its shift to the digital mode.

The company’s growing footprint in the crypto universe can position it for long-term growth. It is well-poised to gain from steady cash-generating abilities. A strong capital position allows MA to pursue acquisitions and deploy capital.

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

Other noteworthy reports we are featuring today include Elevance Health Inc. (ELV), CVS Health Corporation (CVS) and Ameriprise Financial, Inc. (AMP).

Director of Research

Sheraz Mian

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

Apple (AAPL) Banks on Services to Counter Weak iPhone Demand

User Growth, Instagram Strength Aids Meta Platforms (META)

Accretive Buyouts, Strong Balance Sheet Aid Mastercard (MA)

Featured Reports

Elevance's (ELV) Strategic Buyouts & Product Expansion Aid
Per the Zacks analyst, acquisitions, collaborations and product expansions are helping Elevance Health boost its portfolio, leading to steady revenue growth. However, rising costs are denting profits.

CVS Health (CVS) Digital Offerings Grow Amid Stiff Rivalry
The Zacks analyst is impressed with CVS Health's expansion in digital offering with the addition of 1 million new customers during Q3. Yet, stiff rivalry remains a concern.

Hormel Foods (HRL) Benefits From Focus on Prudent Buyouts
Per the Zacks analyst, Hormel Foods is strengthening its business on the back of strategic acquisitions. The company is likely to keep gaining from the Planters and Sadler's Smokehouse buyouts.

BioMarin's (BMRN) Progress with Gene Therapies Encouraging
While BioMarin's existing drugs continue to drive its topline, the Zacks Analyst is encouraged by BioMarin's launch of two new gene therapy treatments in its portfolio.

FUJIFILM (FUJIY) To Benefit From Strong Product Portfolio
Per the Zacks analyst, FUJIFILM's performance is gaining from strong revenue growth across all business segments. Also, strategic collaborations bodes well.

Mohawk (MHK) Rides on Restructuring Plan, Lower Volume Ail
Per the Zacks analyst, strategic/restructuring initiatives to improve profitability are likely to aid Mohawk. Yet, lower volume and higher unabsorbed costs and material inflation hurt.

Strong Demand Aid SunPower (SPWR) Growth, Tariff Impacts Hit
Per the Zacks Analyst, strong demand in residential and commercial markets aid SunPower's growth prospects. Yet, the extended tariff on import of Chinese solar energy equipment, may hurt its earnings.

New Upgrades

Business Restructuring Efforts to Support Ameriprise (AMP)
Per the Zacks analyst, Ameriprise's efforts to restructure operations, focus on core businesses and robust assets under management (AUM) balance will support revenues.

Pro-Investor Steps and Liquidity Boost Interpublic (IPG)
Per the Zacks analyst, increasing current ratio indicates that Interpublic has no problem meeting its short-term obligations. Also, shareholder-friendly steps are tailwinds.

Sales Process Initiatives to Drive Applied Industrial (AIT)
The Zacks analyst is encouraged by Applied Industrial's growth owing to sales process initiativesp, break-fix MRO activity and ongoing pricing actions in its Service Center Based Distribution segment.

New Downgrades

Asset Concentration, Lack of Hedging to Hurt Magnolia (MGY)
The Zacks analyst is worried about Magnolia Oil & Gas' lack of geographic dispersal of properties. The absence of any hedge protection also makes it more exposed to commodity price volatility.

High Costs, Loan Concentration to Hurt Valley National (VLY)
Per the Zacks analyst, elevated expenses due to inorganic growth efforts will likely hurt Valley National's profits. A concentrated loan portfolio is another woe which makes us apprehensive.

Elevated Costs, Fee Income Woes Hurt Bank of Hawaii (BOH)
Per the Zacks analyst, rising costs due to investments in technology and innovation will likely hurt Bank of Hawaii's profits. A decline in fee income due to lower mortgage banking income is a woe.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Apple Inc. (AAPL) : Free Stock Analysis Report

Mastercard Incorporated (MA) : Free Stock Analysis Report

Ameriprise Financial, Inc. (AMP) : Free Stock Analysis Report

CVS Health Corporation (CVS) : Free Stock Analysis Report

Meta Platforms, Inc. (META) : Free Stock Analysis Report

Elevance Health, Inc. (ELV) : Free Stock Analysis Report

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