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Zacks Earnings Trends Highlights: Oracle, Adobe and Jabil

Zacks Equity Research
·5-min read

For Immediate Release

Chicago, IL – March 21, 2024 – Zacks Director of Research Sheraz Mian says, "Estimates for 2024 Q1 have come down since the quarter began, though the magnitude of cuts compares favorably to what we experienced in the comparable period."

Handicapping Q1 Earnings: What to Expect

Note: The following is an excerpt from this week’s Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>

Here are the key points:

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

  • Estimates for 2024 Q1 have come down since the quarter began, though the magnitude of cuts compares favorably to what we experienced in the comparable period for the preceding quarter.

  • The Tech and Energy sectors are having the opposite effects on the Q1 earnings growth pace, with the Energy sector pulling it down and the Tech sector providing a boost.

  • For 2024 Q1, ‘Magnificent 7’ earnings are expected to increase +33.4% on +13.4% higher revenues. Excluding the Mag 7 contribution, 2024 Q1 earnings for the rest of the index would be down -3.6% from the year-earlier period (vs. +2.1% growth otherwise).

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As we look ahead to the 2024 Q1 earnings season, whose early results have already started coming out, it is important to keep in mind where we have been in recent quarters and what is expected for the next few periods.

Earnings growth turned positive in the 2023 Q3 after remaining modestly in negative territory for the three quarters before that period. Two notable developments helped push the aggregate growth picture into positive territory – the Tech sector resumed its traditional growth-driver status, and net margins turned positive.

Expectations for 2024 Q1 and beyond show that the Tech sector is expected to remain a core growth driver, and the margin outlook will continue to improve.

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

Please note that the magnitude of negative revisions to Q1 estimates compares favorably to what we had seen in the comparable period for 2023 Q4.

Since the start of Q1, estimates have come down for 10 of the 16 Zacks sectors. The sectors suffering the biggest estimate cuts include Energy, Basic Materials, Transportation, Autos, and Aerospace.

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

The revisions trend noted here for 2024 Q1 also represents what’s happening to full-year 2024 estimates. While estimates in the aggregate are coming down, several major sectors, including the Tech sector, are still enjoying positive estimate revisions.

This favorable earnings outlook for the Tech sector should reassure us all of the fundamental underpinnings of the group’s stock-market momentum. One can quibble over the appropriate valuation level 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 Tech sector as a whole, 2024 Q1 earnings are expected to be up +18.8% on +7.8% higher revenues. This would follow the sector’s +27.4% higher earnings in 2023 Q4 on +8.5% revenue growth.

Current-period estimates for Oracle ORCL, Adobe ADBE and Jabil JBL have modestly moved lower since they reported results in recent days for their fiscal quarters ending in February, which we count as part of the March-quarter tally.

Oracle is expected to bring in $1.64 in EPS for the fiscal quarter ending in May, down from $1.65 per share a few weeks back. Estimates for Adobe and Jabil have similarly been cut modestly. The pressure on estimates for Oracle, Adobe, and Jabil notwithstanding, the overall revisions trend for Tech sector estimates remains positive.

Had it not been for the Tech sector’s growth, aggregate earnings for the remainder of the S&P 500 index would be modestly in negative territory.

A big part of this year’s earnings growth is expected to come from margins reversing last year’s declines and starting to expand again. The expectation is that aggregate net margins this year get back to the 2022 level, with the Tech sector driving most of the gains.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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Oracle Corporation (ORCL) : Free Stock Analysis Report

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