First-quarter earnings season is turning out to be a dud, but not for a handful of blue chips that have posted blowout earnings.
As expected, profits for S&P 500 companies are set to contract for the first time in years. Wall Street expected earnings to fall 4.6%, and they’re currently on track for a drop of 2.8%. Revenue has fared worse, as more than half of the S&P 500 has missed analysts’ top-line estimates.
And yet, against this largely disappointing backdrop, some of the market’s biggest blue-chip stocks have enjoyed outstanding earnings reports. Whether it was an earnings beat, a beat-and-raise quarter or a positive surprise in some other key measure, some blue chips survived the twin killers of a stronger dollar and lower oil prices.
Lowered expectations on the part of analysts do have a bright side — they make it easier to exceed estimates, and that’s what some of the biggest blue chips had going for them.
No multinational escaped the strong greenback unscathed, but a number of top blue chips managed an end-around to big Street-beating earnings. For example, here are five blue chips that have crushed earnings this season:
Blue Chips Crushing Earnings: Apple Inc. (AAPL)
No surprise here, but the iPhone 6 drove another amazing quarter for Apple Inc. (NASDAQ:AAPL).
Earnings beat Street estimates by 18 cents a share. Revenue came in at $58.01 billion vs. expectations of $56.03 billion. Sales of iPhones hit 61.2 million against a forecast of 58.1 million. Even gross margin was significantly better than expected.
Sales of iPads continued to fall — and by more than forecast — as the bigger phones and new Macs cannibalize sales, but that’s old news.
The real excitement is set aside for Apple Watch. (Too bad Apple didn’t give away any details about its hot new product.)
In another move that should placate investors, Apple updated its program to return cash to shareholders. It will now be sending $200 billion back to shareholders through buybacks and dividends (mostly buybacks — Apple still is a paltry yielder at just 1.6%).
Blue Chips Crushing Earnings: Goldman Sachs Group Inc (GS)
It’s been a mostly mixed season for bank earnings, but not at Wall Street’s biggest investment bank. No longer hobbled by a lack of trading activity in some of its most lucrative markets, Goldman Sachs Group Inc (NYSE:GS) came roaring back in the most recent period.
GS beat Street estimates across the board. Earnings came to $6, vs. a forecast of $4.26. Revenue exceeded estimates by more than a billion dollars. Trading revenue, investment banking revenue and the firm’s equities business all exceeded analysts’ estimates by a wide margin.
A return of volatility to the bond and currency markets were a blessing for GS, as was the continued growth of companies involved in mergers and acquisitions.
As long as markets maintain their normal volatility and the dealmaking landscape remains robust, GS really likes its prospects for the rest of 2015.
Blue Chips Crushing Earnings: Amazon.com, Inc. (AMZN)
As has become par for the course at AMZN, investments in the business led to another net loss for the company, albeit one that was narrower than Street forecasts by 2 cents a share. Revenue also came in ahead of analysts’ expectations.
But the real star of the quarter was the surprising strength in Amazon’s cloud-computing business. Revenue rose nearly 50% last year to $1.57 billion. That put it on pace to be a $6 billion business by the end of the year.
The earnings report launched AMZN stock out of a multimonth period of stagnation, though AMZN has pulled back a little since then. As long as this is just some healthy consolidation, though, AMZN should easily build on its already impressive 35% YTD gain.
Blue Chips Crushing Earnings: Netflix, Inc. (NFLX)
Foreign currency exchange was a killer in the quarter. Earnings came to 38 cents per share, vs. a forecast for 69 cents. Strip out the effects of the stronger dollar, and EPS would have been 77 cents. Of course, international expansion remained the main reason for the decline in profits.
Helpfully, subscriber growth was a monster. Net subscriber additions increased 22% year-over-year to 4.88 million. Netflix itself expected the figure to come in at just 4.05 million.
International growth is humming along — Netflix added 2.6 million customers overseas for a total of 62.27 million users worldwide — and its in-house programming is luring new customers.
Those two engines of growth have so far proven to be worth their pricey costs.
Blue Chips Crushing Earnings: Microsoft Corporation (MSFT)
In one of the more pleasant positive earnings surprises, Microsoft Corporation (NASDAQ:MSFT) shift toward being more of an enterprise company appears to be working quite well.
Heck, MSFT beat estimates by 10 cents a share.
The stronger dollar weighed on results, as did the slowly melting iceberg of sales of PCs. Fortunately for MSFT, the cloud helped save the day. Indeed, revenue from the cloud segment more than doubled year-over-year, driven by increases in Office 365 subscriptions and Azure.
The strength in cloud services allowed MSFT to exceed top-line estimates as well — no small feat in this revenue-constrained quarter.
No, the strong quarter doesn’t mean the bad news is over for MSFT. It’s in the midst of a transition that will take years to complete. But the better-than-expected results do offer proof that this strategic change of course is working.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
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