3 earnings reports that could mark turning points

3 earnings reports that could mark turning points

3 earnings reports that could mark turning points

It wasn’t so bad after all.



MarketBeat.com – MarketBeat

With second-quarter earnings season almost in the books, worries about a series of nasty earnings surprises have proven unfounded. According to the latest information from Factset, about three out of four S&P 500 companies reported positive EPS surprises, on par with the historical norm.

On the other hand, the wide variety of income beats has been harder to come by. The average magnitude of beats has lagged significantly behind the past.

This means that the companies that impressed us with big earnings surprises stood out more. Based on market reactions, we may one day see second-quarter earnings as a major inflection point for these three stocks.

What did we learn from the Trade Desk Q2 report?

Digital advertising leader Trade Desk, Inc. (NASDAQ: TTD) matched Wall Street’s EPS forecast of $0.20, but beat its peak estimate by reporting $377 million in second-quarter revenue. The 35% year-over-year sales growth helped ease fears of a major pause in global advertising spending due to economic uncertainty and sent Trade Desk shares soaring.

The stock rose 36% in heavy volume last week, distancing itself from the $50 where it had lingered since the last earnings announcement. The last time Trade Desk got this much trading attention in November 2021, it hit a spread-adjusted all-time high above $110.

Now trading in the mid-$70s, there is still plenty of ground to catch up, but some analysts believe it is on the right track. Eight of nine companies on the sell side reiterated buy ratings after the surprise Q2 update, including Wells Fargo, which set a price target of $100.

The result and management’s good outlook showed that demand for programmatic advertising is resilient. With a stable customer retention rate of 95%, some of the world’s largest consumer brands continue to rely on the Trade Desk platform to power their omnichannel marketing campaigns. The operator of the grocery chain Albertson’s recently became one of the latest to take a seat at the Trade Desk.

Has Abbott Labs’ stock bottomed out?

Last month, Abbott Laboratories (NYSE:ABT) posted Q2 EPS of $1.43, which marked 22% year-over-year growth and crushed the consensus estimate by more than 25%. The surprise was led by a strong performance from the company’s diagnostics business, which generated 36% revenue growth on strong demand for rapid Covid-19 tests. It brought in an additional $1 billion in Covid test sales compared to the prior year period.

While the diagnostics segment stole the show, even without Covid testing, Abbott Labs generated organic sales growth of 6%, reflecting continued strength in pharmaceuticals and medical devices. The well-rounded growth, combined with management’s upgraded EPS forecast, sent the stock firmly off its 52-week low, and it has since settled at the $110 level.

Going forward, Abbott’s Rapid Diagnosis still has a lot to offer. The company sharply raised its forecast for full-year Covid testing revenue from $4.5 billion to $6.1 billion as the number of cases continues to rise in Asia and other parts of the world. world. Meanwhile, the infant formula relaunch is expected to provide a significant boost to second-half revenue.

With analysts raising their EPS estimates following the second quarter report and Abbott having a history of beating those estimates, the stock appears to be on a roll as it approaches the final months of the year. It’s still down 21% year-to-date, but, at less than 23 times industry earnings, it still has room.

Has Citigroup stock reached a turning point?

Citigroup Inc. (NYSE:C) rose three times the average volume after its Q2 report and has been trending higher ever since. Although profits were down from the previous year, they were 30% higher than the street expected.

The release of the statement was driven by improving net interest income which was supported by the Fed’s aggressive rate hike campaign. The “big four” bank was able to charge more for its mortgages and other lending products, offsetting weak investment banking activity.

With more Fed rate hikes likely to come, Citi’s earnings outlook is improving for at least the next two quarters. From there, the fruits of long-awaited investments in the retail banking and capital markets divisions could keep the momentum going.

If the market encounters a pronounced recession along the way, Citi is in a better position than most banking peers to weather the storm. In response to the June 2022 Fed stress test, the company announced that it would increase its capital buffer to a more conservative level of 4%.

Unfortunately for shareholders, the cautious financial position comes at the expense of a stagnant dividend and a suspended buyback program. Still, the stock’s forward yield of 3.75% remains comfortably above the financial sector average of 3.2%. This, combined with expectations of more hawkish Fed action, should make Citi’s stock worth staking.

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