Overall it has been a good earnings season. Despite decelerating earnings growth, companies have been consistently topping estimates and have been rewarded for it. While there have been some big misses as always, there have been plenty of big winners this earnings season.
With the market coming out of a tough December, equities were already rebounding in January before the start of the earnings season, and sentiment remains cautiously upbeat on the overall market.
There are still a lot of big name companies set to report this earnings season which could change the overall mood, but at this time Wall Street has liked what its seen. Let’s take a look at five of the big winners so far this season and what the future may hold after their post-earnings rallies.
Snap Inc. (SNAP)
Snap Inc. (SNAP), the social media company behind the highly popular Snapchat enjoyed huge gains following its recent quarterly report. The company reported a huge 36% revenue jump, and it lost 14 cents per share versus 28 cents during the same period last year. The stock is coming off a miserable year of steady losses, but the stock rallied on the results by over 20%. Also lifting investor confidence was the company’s ability to maintain users, albeit at a flat rate of 186 million users per day, the same as the previous quarter.
Snap had been losing users, so the market is rewarding the company’s ability to stem its losses. Snap has yet to turn a profit as a publicly traded company, and until it does it will be hard for the stock to really become a star. Shares will be volatile around any future earnings report, and it may be wise to sit on the sidelines until the company is able to prove an ability to continue growing the top and bottom line while maintaining or growing its daily user base.
iPhone maker Apple (AAPL) has come out a winner this earnings season following a strong set of quarterly numbers on January 29. The company beat on the top and bottom line, but what really got Wall Street happy was its emphasis on growing its services business. The company enjoyed year over year revenue growth from services of 19%. The segment now makes up 12% of the company’s total revenues, making it a little less reliant on iPhone sales, which have worried the market over the last year. Apple services revenue hit $10.9 billion in the quarter, and the company disclosed its gross profit on the segment was a high 62.8%.
AAPL definitely fell out of grace on Wall Street in 2018, but we were already seeing some signs of strength returning to the stock in the weeks ahead of the quarterly report. The valuation remains attractive with the stock trading at 14 times earnings, and with the slight enthusiasm before the report and the stock’s strong move following the report AAPL should manage to continue chipping away at last year’s losses.
Social media heavyweight Facebook (FB) is coming off a year it would love to forget as a data privacy scandal weighed on the stock and eroded one of the company’s most valuable assets – user trust. Facebook reported a blowout quarter on January 30 and the stock shot to the upside. Wall Street has been concerned about user growth, but that metric held steady at 9% year over year. Facebook is investing heavily in content and security, but Wall Street still expects big things with earnings forecast to rise 36% for the current year and by 18% per annum over the next five years. There is no denying Facebook’s global reach, and the company has emerged as the only real online advertising competition for Google (GOOGL).
FB stock deserved to take a hit as security fears mounted, but the stock appears to have oversold and investors still have a chance to catch a lot of the bounce. The stock trades at $169.84 with an average price target of $194.00.
Corning (GLW) make high-tech glass and network components. The stock was in a downward trend for several months before the company’s strong fourth-quarter report on January 29. The company beat on both the top and bottom line, and the stock jumped over 11%. China is a big market for smartphones and televisions that use Corning’s glass, and Wall Street had shown concern over the possible impact the ongoing trade war between the U.S. and China would have on the company. Corning stated that it does not see a meaningful impact from the enacted tariffs, and that it was already using conservative estimates for its businesses in China.
Corning is expected to grow earnings by 15.8% next year, and with the stock trading at just 16 times forward earnings there appears to be additional upside. GLW is trading at $33.84 with an average price target of $35.93.
Procter & Gamble (PG)
Consumer goods maker Procter & Gamble (PG) was already showing a lot of strength ahead of its quarterly report on January 2, and strong results on the top and bottom line helped push shares to a new all-time higher. PG remains within pennies of its all-time high $98.32 and is currently trading at $98.11. Analysts have an average price target of $96.54 on the stock, but given its recent strength it would not be surprising to see those estimates start to rise over the next couple of weeks. Earnings of $1.25 per share topped the $1.21 forecast while revenue rose to $17.44 billion from $17.4 billion during the same period last year and topped the $17.1 billion estimate.
The stock is trading at 20 times future earnings and profits expected to rise 7% per annum over the next five years. PG’s recent strength and solid results should keep shares trending in the right direction.