AUS
NZ
UK
CA
USA
IND
Summary
- The third-quarter earnings have been better than the expectations with some blue-chip S&P 500 companies reporting 20% higher profit than estimates.
- Giants like Facebook and Amazon clocked higher revenue vs industry estimate
- Australian companies are also posting good numbers on average with Afterpay clocking more than 100% sales and MyFiziq Limited witnessing 1634% in cash receipts.
- The earnings have been good so far, but factors like the US elections, a spike in coronavirus cases, fear of new lockdown and no clear sight of vaccine have only made the future earnings more uncertain.
The coronavirus pandemic has put a dent in the earnings of various sectors and the sector leaders. However, against the initially forecasted drop in the earnings, the recovery has been quite fast across sectors.
Looking at the third quarter performance, the Wall Street has accomplished better than the estimates, especially in the pharma and technology sectors. The broader pack has also reported a shallow decline in profit and sales figures over estimates.
According to the FactSet data, for 63% of blue-chip S&P 500 companies, the total profit per share reported is higher by 20% than estimates made a few weeks ago.
Some mega-cap companies like Facebook and Amazon have helped drive the overall sentiments of the market. These giants remained at the forefront, leading the indices to a remarkable recovery.
Some outstanding numbers by the resilient businesses
Facebook, Inc. (NASDAQ:FB), in its recent Q3 numbers, reported revenue of US$21.5 billion, with net income of US$7.8 billion. During the quarter, the company earned US$2.71 profit per share. All these numbers beat the expectations hands down. Few estimates on profit per share were as below as US$2.00, whereas revenue was expected at ~US$20.00 billion.
Image Source: Facebook’s website
Although the company didn’t share a specific outlook for the next quarter but anticipates Q4 to have a higher growth rate in ad revenue than Q3 of 2020.
On 29th October, Amazon.com, Inc. (NASDAQ:AMZN) came out with its Q3 numbers and surprised the street. The company posted earnings of US$12.37 per share vs US$7.41, as forecasted by industry analysts, surveyed by EODHD/Others. The same story continued with the total revenue, which stood at US$96.15 billion vs US$92.7 billion expected by analysts surveyed by EODHD/Others.
For the next quarter, Amazon expects its sales between US$112 billion and US$121 billion, which again reflects a growth of 28% to 38% from a year earlier. Although a massive amount of US$2 billion is planned to be spent on coronavirus-related measures.
Another company whose earnings went through the roof was Zoom Video Communications. The company started to report soaring numbers since the start of the pandemic as online technology space was one of the biggest beneficiaries of work from home culture.
In the Q2, the revenue soared by more than three times year over year to US$663.5 million, and the net income saw an exponential rise from a mere US$5 million to US$185 million. These mighty numbers also led the stock price to yield a massive 700% return during the year, making it a multi-bagger within a few months.
Australian businesses are not lagging behind
Australian companies have also followed the trend and witnessed more beats than misses. The broader market rally has shown that the investors are rewarding the earnings beats more than punishing the misses.
Afterpay Limited (ASX: APT) recently impressed the street with its Q1FY21 numbers. The underlying sales increased by 115% to AU$4.1 billion, up from AU$1.9 billion Q1 FY20. The underlying sales in the US alone grew by 229%, and approximately 12.5k new customers joined the platform per day during the quarter.
The active customers grew 98% to 11.2 million, which indicates strong earnings in the near future.
MyFiziq Limited (ASX: MYQ) has also reported strong numbers across the board with an eye-opening surge of 1634% in cash receipts which stood at AU$659k. The positive cashflow of the company throughout the quarter shows the business resilience towards the pandemic.
Image Source: MyFiziq’s ASX update, dated 30th October 2020
The surge in Coronavirus cases is overshadowing the uptick in the earnings
The recent record surge in the Coronavirus is suppressing the enthusiasm seen after an uptick in the numbers. More than the current numbers, the street seems to be worried regarding the near-term future of the companies and the economy as a whole.
To escalate the fear, European countries have started to go into lockdown again due to more than expected rise in the cases. This has resurfaced the possibility of another lockdown in the US which could again hammer the earnings of these companies that still rely on physical business.
The reason indices aren’t reflecting the earnings is because the wall street doesn’t live in the past. It lives on the future earnings prospects, which seems to have a blurry outlook going forward.
Still no guidance by many corporate giants
Owing to the significant uncertainty in the future, most of the companies have refrained from giving specific or any guidance whatsoever for the future. This is the scenario even when the companies are delivering above expectation numbers.
These companies include General Electric, Harley Davidson, Xerox, Boeing, to name a few. To simply put it, rising coronavirus cases, fear of another lockdown, uncertainty regarding the US elections and no clear sight of vaccine are all enough to suppress the current enthusiasm and make future earnings look gloomy.
