Thursday, November 23, 2022
The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features an update on the Q3 earnings seaosn that is heading towards a close and new research reports on 16 major stocks, including Linde plc (LIN), Texas Instruments Incorporated (TXN) and Trane Technologies plc (TT). 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 >>>
Q3 Earnings Season Scorecard
With results from 486 S&P 500 members or 97.2% of the index's total membership already out, the Q3 reporting cycle has effectively come to an end. Total earnings for these companies are up +2% from the same period last year on +11.7% higher revenues, with 69.5% beating EPS estimates and 68.5% beating revenue estimates.
As we have consistently pointed out, the Q3 EPS and revenue beats percentages are below what we had seen from the same group of companies in the last few reporting cycles, buth otherwise in the historical ranges, albeit towards the lower end of the ranges.
For 2022 Q4, total S&P 500 earnings are currently expected to be down -5.6% from the same period last year on +4.4% higher revenues. Estimates have been steadily coming down, with the current -5.6% expected earnings decline down from +1.7% at the start of the quarter. Excluding contribution from the Energy sector, 2022 Q4 earnings for the rest of the index would be down -10.2% from the same period last year.
For full-year 2023, S&P 500 earnings are currently expected to be up +2.6% on +2.4% higher revenues.
Estimates have consistently come down since peaking in mid-April, with aggregate S&P 500 earnings down -8.8% as a whole and -11.7% excluding the Energy sector.
Earnings estimates have come down for 13 of the 16 Zacks sectors, with the biggest declines for the Construction, Retail, Consumer Discretionary, Technology, Basic Materials, Industrial Products and other sectors.
Today's Featured Research Reports
Linde’ shares have gained +2.9% over the past year against the Zacks Oil and Gas - Field Services industry’s gain of +18.4%. Its process gas, like hydrogen, is being utilized for clean fuels, while its high-purity and specialty gases are employed to manufacture electronics. Linde has long-term contracts with on-site customers backed by minimum purchase requirements, thereby securing stable cashflows.
The firm reported strong third-quarter results, owing to increased prices and volumes across all end markets, except for healthcare. However, the cost of sales continues to increase, hurting the firm’s bottom line. The firm has mostly been paying a lower dividend yield than the industry’s composite stocks over the past two years.
(You can read the full research report on Linde here >>>)
Shares of Texas Instruments have declined -8.0% over the past year against the Zacks Semiconductor - General industry’s decline of -41.2%. While supply chains have started easing, they still remain a headwind, as are the new export restrictions to China. The company’s weak outlook for fourth quarter shows signs of deteriorating chip demand. This remains a major concern. Further, softness in the personal electronics and industrial end-markets remains an overhang.
However, continued rebound in the automotive market was a tailwind. Growing momentum across the communication equipment and enterprise systems markets drove the results further.
Additionally, strong performance of Analog and Embedded Processing segments contributed well. Solid investments in new growth avenues and competitive advantages remain tailwinds.
(You can read the full research report on Texas Instruments here >>>)
Shares of Trane Technologies have declined -8.6% over the past year against the Zacks Technology Services industry’s decline of -62.4%. The company’s product and service diversity put Trane in the face of fierce competition in terms of price, quantity, delivery, service, support, technology and innovation. The company’s business experiences seasonal fluctuations in revenues. Lower liquidity remains a concern. Partly due to these headwinds company’s bottom line gets effected.
However, Trane Technologies remains focused on improving the quality of its products and services and operating efficiencies to achieve sustained improvement in earnings and cash flow. It prioritizes improving its business operating system and innovation through business transformation initiatives and prudent investments.
Trane has a track record of repurchasing shares and paying dividends consistently. Such moves instill investor confidence and positively impact the company's bottom line.
(You can read the full research report on Trane Technologies here >>>)
Other noteworthy reports we are featuring today include Eni S.p.A. (E), PACCAR Inc (PCAR), and AmerisourceBergen Corporation (ABC).
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
Linde (LIN) Contracts With Minimum Volume Requirements Aid
Automotive & Industrial Growth Aids Texas Instruments (TXN)
Dividends Aid Trane Technologies (TT), Low Liquidity Ails
Eni (E) to Benefit From Discoveries at Meleiha Concession
The Zacks analyst believes that Eni's discoveries in the Meleiha concession of Egypt's Western Desert will strengthen its footprint in the region, and boost organic growth and cash flow.
Organic Growth Aids AmerisourceBergen (ABC) Amid Competition
Per the Zacks analyst AmerisourceBergen should benefit from continued solid organic revenue growth World Courier unit and Specialty distribution busines amid cutthroat competition in the Medtech space
Southwest Airlines (LUV) Rides on Air Travel Demand, Costs Ail
The Zacks Analyst is impressed with the fact that increased air-travel demand is aiding Southwest Airlines' top-line performance. However, rising fuel costs continues to weigh on the bottom line.
Horizon's (HZNP) Marketed Drugs Aid Growth Amid Competition
Per the Zacks analyst, strong performance of the inflammatory and orphan businesses are driving Horizon's growth. However, stiff competition in the target market remains major a concern.
Digital Transformation and Acquisitions Aid Amdocs (DOX)
Per the Zacks analyst, Amdocs is benefiting from ongoing digital transformations and adoption of its cloud services. Moreover, strategic acquisitions like Sourced and Openet are a positive.
Product Vitality & Strong Pricing Aid Acuity Brands (AYI)
Per the Zacks analyst, volume growth owing to product vitality in lighting and spaces businesses, price increases, and product and productivity improvements benefited Acuity Brands.
Solid Portfolio and Increasing Contract Wins Aid Plexus (PLXS)
Per the Zacks analyst, Plexus' performance is being driven by from strong revenue growth across all segments and regions. Also, rising manufacturing contract wins and new program ramps are tailwinds.
New Lineup of Models, Aftermarket Growth Aid PACCAR (PCAR)
Per the Zacks analyst, PACCAR's new DAF model lineup is poised to augur well for long-term growth by improving product mix. Also persistent growth in aftermarket parts is likely to boost sales.
Ross Stores (ROST) Q3 Sales Mirror Improved Sequential Trends
Per the Zacks analyst, Ross Stores' Q3 sales reflect improved traffic from the first half, favorable sequential sales trends at dd's DISCOUNTS, higher average basket size and better inventory position
Rising Investment Income, Acquisitions Aid Owl Rock (ORCC)
Per the Zacks analyst, the company's revenues are driven by higher investment income, thanks to its improved interest income. Buyouts enhance its capabilities and diversify the business.
High Commodity, Operational Costs Ail Gentex (GNTX) Margins
Soaring commodity cost inflation worsened by the ongoing supply bottlenecks is a concern for Gentex. Per the Zacks analyst, high operational expenses may also limit margins.
Credit Sales, Solid Balance Sheet Aid Bread Financial (BFH)
Per the Zacks analyst, Bread Financial is set to grow on strong credit sales aided by solid consumer spending. Moreover, its healthy balance sheet should drive long-term growth.
Elevated Expenses, Tough Backdrop to Hurt State Street (STT)
Per the Zacks analyst, rising costs due to investments in franchise and inflationary pressure will likely hurt State Street's bottom line. A tough operating backdrop will put strain on fee income.
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