Corporate earnings are having a moment right now.
About 60% of S&P 500 companies have now released results from the most-recent quarter, and 86% of these companies have exceeded analysts’ earnings estimates. FactSet also reports that the average earnings surprise is nearly 23%, which is well above the five-year average of 6.9%. The average earnings growth rate is equally impressive, currently at 33.8%.
The large tech companies known as the FAANG stocks – Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX) and Alphabet (GOOGL) — also recently reported earnings and hit it out of the ballpark. These companies continue to thrive in the “new normal” and offer customers an economic lifeline through e-commerce, cloud computing, digital advertising and artificial intelligence.
And despite the recent market jitters, it’s an exciting time for these major tech leaders, and for my own fundamentally superior stocks, so let’s get right to it…
Facebook reported year-over-year sales growth of 48% to $26.1 billion, with advertising revenue up 46%, thanks in part to a 30% increase in the company’s average price for an ad. Total revenue beat Wall Street consensus estimates by 10.4%.
Earnings climbed 93% from a year prior to $3.30 per share, which crushed analysts’ expectations by 41%.
Average monthly active users climbed 4.5%, year-over-year, though the company’s users were flat in the U.S. and Canada for the second straight quarter.
The stock surged on the strong earnings report and is up over 2% over the past 5 days.
Looking ahead, Facebook expects total revenue will continue to accelerate in the second quarter, though year-over-year growth should begin to decelerate in the last two quarters of the year as the company laps periods of increasingly strong growth.
Wall Street is anticipating revenue will rise 5.9% in the coming quarter, and earnings should fall about 12%.
Amazon’s first quarter net sales jumped 44%, year-over-year, to $108.5 billion and topped analysts’ estimates of $104.6 billion by 3.7%.
The company now has over a third more Prime members, or 200 million members, than it did in January 2020. Online store net sales of $52.9 billion and Amazon Web Services net sales of $13.5 billion bested analysts’ estimates.
Earnings of $15.79 per share more than tripled, year-over-year, and demolished analysts’ expectations of $9.64 per share by 64%.
The company expects second-quarter sales from $110 billion to $116 billion, which would represent from 24% to 30% growth from the second quarter of 2020. Operating income is expected to be between $4.5 billion and $8.0 billion, compared with $5.8 billion in the second quarter of 2020.
Shares soared over 2% after Amazon reported last Friday, but the stock is down nearly 4% over the past five days.
Analysts anticipate revenue will increase in the upcoming quarter to $108.9 billion, while earnings should dip to $10.99 per share.
Apple notched record second fiscal quarter revenue of $89.6 billion, up 54% from a year ago and 15.8% higher than analysts’ expectations.
Earnings of $1.40 per share rose 119%, year-over-year, and beat analysts’ expectations by $0.41 cents per share.
The company saw double-digit growth in all of its product categories, with iPhone sales up 65.5% from a year ago, Mac sales up 70.1% and iPad sales up 79%.
The company said it will increase its dividend by 7% to $0.22 per share and will carry out $90 billion in share buybacks.
The company didn’t provide guidance for the quarter ending in June, the CFO Luca Maestri said Apple expects to see a double-digit rise in revenue.
Wall Street is looking for Apple earnings to fall to $1.00 per share in the coming quarter, while revenue is expected to decrease to $72.4 billion.
Shares are down more than 5% over the past five days.
Alphabet (“Google’s” corporate parent) saw revenue climb 34% year-over-year to $55.3 billion, which beat Wall Street’s consensus estimate by $3.6 billion. Earnings of $26.29 per share rose 166% from a year prior and crushed analysts’ expectations for $15.66 per share by 68%.
CEO Sundar Pichai said “Over the last year, people have turned to Google Search and many online services to stay informed, connected and entertained. We’ve continued our focus on delivering trusted services to help people around the world. Our Cloud services are helping businesses, big and small, accelerate their digital transformations.”
Google Search brought in $31.9 billion in the quarter, a 30% gain from a year ago, YouTube ad revenue increased 49% from a year ago to $6 billion, and Cloud revenue soared 46% to $4.05 billion.
Shares are down more than 5% over the past five days.
Looking forward, analysts estimate revenue will climb to $55.98 billion in the following quarter, while earnings should come in at $19.05 per share.
Looking ahead to the second quarter, analysts in April also increased their earnings estimates for S&P 500 companies by 4.2% — the second highest increase during the first month of the quarter since 2002, FactSet said.
Netflix saw revenue climb 24%, year-over-year, to $7.16 billion, beating estimates by $42 million, while earnings of $3.75 climbed 138% from a year ago and beat estimates by 25%.
However, the company gained 3.98 million subscribers, missing the consensus estimate for 6.2 million. Netflix blamed the miss on the pandemic as it faces increased competition in the content streaming space.
The company said production delays due to COVID-19 in 2020 will lead to a “…2021 slate that is more heavily second half weighted with a large number of returning franchises.”
The stock is down more than 1% over the past five days.
A Super Strong Earnings Season
Overall, the quarter has been outstanding for the FAANG stocks, with outstanding earnings and revenue surprises.
Looking forward, I expect that whichever stock can sustain the good sales and earnings and profit from the inflationary bubble that’s rolling through our economy will outperform.
However, I also expect to see a more narrowly focused market as the year rolls on.
But if you’re looking for fundamentally superior stocks to invest in, my Growth Investor Buy List is chock full of high-quality stocks dominating their respective industries. This is important, especially now that the first-quarter earnings season is now in full swing.
In the past three months, my average Growth Investor stock had its consensus earnings estimate revised 31.2% higher. Naturally, these positive earnings revisions are expected to precede massive first quarter earnings surprises.
If you’re interested in my Growth Investor service, now is the perfect time to join. I released my Growth Investor May Monthly Issue on Friday with seven new buys, my latest Top 5 Stocks list, earnings reviews and earnings previews for the 19 Growth Investor stocks that report this week.
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Note: The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
Facebook (FB), Amazon (AMZN), Alphabet (GOOG)