Zacks Earnings Trend Highlights: Oracle, Adobe and Jabil

For Immediate Release

Chicago, IL – March 21, 2024 – Zacks Research Director Sheraz Mian says, “Estimates for the first quarter of 2024 have declined since the beginning of the quarter, although the size of the cuts compares favorably to what we experienced in the comparable”.

Earnings bump in Q1: What to expect

Note: Below is an excerpt from this week’s earnings trends report. You can access the full report containing detailed historical current and estimates for the current and future periods, please click here >>>

Here are the main points:

  • S&P 500 total earnings for the first quarter of 2024 are expected to increase +2.1% from the same period last year on +3.4% higher revenue. This follows +6.5% earnings growth on +3.8% higher revenue in Q4 2023.

  • Estimates for the first quarter of 2024 have declined since the beginning of the quarter, although the size of the cuts compares favorably with what we experienced in the comparable period for the previous quarter.

  • The Technology and Energy sectors are having opposite effects on the pace of Q1 earnings growth, with the Energy sector depressing it and the Technology sector providing a boost.

  • For the first quarter of 2024, ‘Magnificent 7’ earnings are expected to grow +33.4% with +13.4% higher revenue. Excluding the Mag 7 contribution, Q1 2024 earnings for the rest of the index would have been -3.6% down from the year-ago period (versus +2.1% growth otherwise).

As we look ahead to the Q1 2024 earnings season, whose early results are already starting to come in, it’s important to consider where we’ve been in recent quarters and what’s in store for the coming periods.

Earnings growth turned positive in the third quarter of 2023, after remaining modestly in negative territory for the three quarters prior to this period. Two notable developments helped push the overall growth picture into positive territory – the technology sector resumed its traditional growth driver status and net margins turned positive.

Expectations for the first quarter of 2024 and beyond indicate that the technology sector is expected to remain a key driver of growth and the margin outlook will continue to improve.

As noted in the chart above, Q1 2024 earnings are expected to increase +2.1% from the same period last year with +3.4% higher revenue.

Please note that the size of the first quarter’s negative estimate revisions compares favorably to what we had seen in the comparable period for the fourth quarter of 2023.

Since the start of the first quarter, estimates have fallen for 10 of the 16 Zacks sectors. Sectors that have seen the biggest downgrades include Energy, Basic Materials, Transportation, Auto and Aerospace.

On the positive side, estimates have risen for 6 of the 16 Zacks sectors since the start of the quarter, with the Retail, Tech and Utilities sectors enjoying notable positive revisions.

The revisions trend observed here for the first quarter of 2024 also represents what is happening with full year 2024 estimates. While overall ratings are falling, several key sectors, including the technology sector, are still enjoying positive ratings revisions.

This favorable earnings outlook for the technology sector should reassure us all about the fundamentals of the group’s stock market momentum. One can debate the appropriate level of valuation for an individual tech stock, but we can say with a reasonable degree of confidence that the group’s stock market momentum should remain in place as long as the revisions trend remains favorable. .

For the technology sector as a whole, Q1 2024 earnings are expected to grow +18.8% from +7.8% higher revenue. This would follow the sector’s highest +27.4% earnings in the fourth quarter of 2023 on +8.5% revenue growth.

Current period estimates for The burden ORCL, Adobe ADBE and Jabili JBL has moved modestly lower since reporting results in the last few days for their fiscal quarters ending in February, which we count as part of the March quarter report.

Oracle is expected to post $1.64 in EPS for the fiscal quarter ending in May, up from $1.65 a share a few weeks ago. Ratings for Adobe and Jabil are down modestly. Despite the pressure on ratings for Oracle, Adobe and Jabil, the overall trend of reviews for technology sector ratings remains positive.

If it hadn’t been for the growth of the technology sector, total returns for the rest of the S&P 500 index would be in negative territory.

Much of this year’s earnings growth is expected to come from margins reversing last year’s declines and beginning to expand again. The expectation is that overall net margins this year will return to 2022 levels, with the technology sector driving most of the gains.

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