Our analyst team’s greatest research output is presented in the Zacks Research Daily. Today’s Research Daily includes a live update on the second-quarter earnings season as well as new research studies on 16 key stocks, including Chevron Corporation (NASDAQ:CVX), Adobe Inc. (NASDAQ:ADBE), and Advanced Micro Devices, Inc. (NASDAQ:AMD). These research reports were hand-picked from our analyst team’s around 70 publications published today.
Q2 Earnings Season Scorecard
With this morning’s results, we now have Q2 earnings reports from 48 S&P 500 companies. Total earnings for these firms are down -13% year on year on +5.9% higher revenues, with 72.9% exceeding EPS predictions and 62.5% exceeding revenue estimates. The 72.9% EPS beats percentage is the lowest for this group of 48 index members since the first quarter of 2020 and the third lowest in the previous 20 quarters. The percentage of revenue exceeded is likewise modest. The difficulty of firms to reach consensus estimates is the one notable aspect at this early stage in the Q2 reporting cycle.
The unfavorable comparisons for the Finance sector, whose Q2 earnings are down -28% from the year-ago level, are a major driver of the -13% year-over-year fall in earnings for the 48 index members who have reported at this stage. Excluding the impact from the Finance sector, Q2 profits for the remaining index businesses that have reported are actually up +12.1% from the same period last year.
Featured Analyst Reports
Chevron –
Chevron shares, over the last year, have outperformed the Zacks Oil & Gas – Integrated – International industry (+53.2% vs. +41.7%). Chevron’s recent outperformance, which the Zacks analyst believes will be sustainable in the future, is being driven by the company’s better oil-price leverage relative to the other supermajors and attractive production growth profile. Because of its dominant position in the lucrative Permian Basin, America’s No. 2 oil firm has one of the greatest existing project pipelines in the industry. Chevron, on the other hand, was not immune to the 2020 commodity price slump, which forced it to drastically curtail spending. The company’s strong susceptibility to oil prices is also a source of concern.
Furthermore, the supermajor’s 10-year resource replacement ratio of 100% indicates that it will be unable to replace the amount of oil and gas produced. Finally, Chevron has been a latecomer to the net-zero bandwagon.
Adobe –
Adobe shares have fallen -33.2% year to date, compared to a -26.6% drop in the Zacks Computer – Software industry. Lower end-market demand and hefty acquisition costs remain significant overhangs for the organization. Nonetheless, Adobe’s Creative Cloud, Document Cloud, and Adobe Experience Cloud offerings are assisting the company in driving top-line growth.
Rising subscription revenues and strong momentum across mobile apps are also significant advantages. Furthermore, development in emerging economies, high online video creation demand, Acrobat adoption, and improving average revenue per user are all tailwinds. The Zacks Analyst is still bullish on Adobe’s market position, appealing product lines, consistent innovation, and strong adoption of Creative Cloud and Adobe Marketing Cloud. Furthermore, the company’s robust balance sheet is still a plus.
AMD –
AMD shares have fallen -4.8% in the last year, compared to a -4.5% drop in the Zacks Electronics – Semiconductors industry. The corporation faces intense competition from NVIDIA, and Intel is a source of concern. However, AMD is benefiting from increased demand for its Ryzen and EPYC server CPUs as Artificial Intelligence (AI), and Machine Learning (ML) become more prevalent in industries such as cloud, gaming, and data center.
A crucial trigger is the growing clout of 7 nanometers (nm) goods in the data center vertical, driven by work-from-home and online learning trends. AMD offered an excellent revenue estimate for 2022, supported by sustained growth across all sectors. Higher revenues from server and client processors are likely to result in a sequential increase. AMD’s data center division will benefit from the acquisitions of Xilinx and Pensando. Alliances with Amazon, Microsoft, Baidu, and JD.com expand commercial opportunities.
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