October 1, 2020

The Earnings Big Picture & Analyst Reports for Tesla, Mastercard & Others

Friday, September 4, 2020

We have provided a big-picture update on the evolving earnings backdrop in today’s Zacks Research Daily. And as we always do, we have featured fresh research reports on 16 major stocks, including Tesla (TSLA), Mastercard (MA) and United Parcel Service (UPS). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.

You can see all of today’s research reports here >>>

The Earnings Discussion 

This is a good time to take a look at consensus expectations for the September quarter, with results for the June quarter essentially over now. As of today, we have only S&P 500 company still to report Q2 result. This company is Kroger (KR), which reports next week on Sept. 11th.

Regular readers of our earnings commentary know that we were encouraged the tone and substance of Q2 results, even though the overall growth picture remained anemic as a result of the ongoing Covid-19 pandemic.

A big reason for our favorable earnings commentary has been the revisions trend, which notably turned positive in early July and has remained so ever since. As a result, while earnings growth is still expected to remain under pressure in the September quarter, it has nevertheless been steadily improving.

Total Q3 earnings for the S&P 500 index are currently expected to be down -23.9% from the same period last year on -3.2% lower revenues, which would follow the -32.6% earnings decline -9.2% lower revenues in Q2.

Please note that Q3 earnings were expected to be down -26.5% at the start of July, so the decline rate has notably improved since the start of the quarter. We see similar improving trend with estimates for full-year 2020 and 2021. 

Tesla shares have lost groun over the last few trading sessions, but the stock has literally been on fire this year, up +353.6%. Some pullback after such rapid fire gains are to be expected,  but the Zacks analyst believes that Tesla has a first-mover advantage in the EV space with high range vehicles, superior technology, and software edge.

Robust Model 3 demand, ramp up of Model Y production, significant Shanghai Gigafactory progress, amazing line-up of upcoming products and aggressive expansion efforts bode well for the firm. However, high R&D, SG&A costs and massive capex may clip the margins.

Tesla is investing heavily to increase production capacity, boost sales and construct Gigafactories, which are likely to strain its near-term prospects. Waning margins for Model S/X is another concern. Thus, investors are recommended to wait for a better entry point.

(You can read the full research report on Tesla here >>>)

Shares of Mastercard have gained +13.7% over the past six months against the Zacks Financial Transaction Services industry’s rise of +8.8%. The Zacks analyst believes that the company is gaining from an increased demand for digital and contactless solutions owing to the COVID crisis.

The company has undertaken several acquisitions to supplement organic efforts and diversify revenues over the years, which has helped expand its addressable markets and strengthen core product solutions. Investment in technology keeps it at the forefront of the rapidly-evolving payments industry.

It is also witnessing buoyant demand for its Data & Analytics and Cyber solutions. Mastercard’s solid capital position enables investment in business and returning value to shareholders. However, escalating costs might put pressure on the company’s margins. It also cancelled its annual 2020 outlook for net revenues and operating expense due to coronavirus-induced business loss.

(You can read the full research report on Mastercard here >>>)

UPS shares have gained +29.8% over the past year against the Zacks Transportation – Air Freight and Cargo industry’s fall of +40.5%. The Zacks analyst believes that UPS is being aided by a significant increase in home deliveries amid the prevalent coronavirus pandemic.

Notably, the need for door-to-door delivery of essentials during this crisis is rising. Owing to the surge in residential and healthcare shipments, UPS performed impressively in second-quarter 2020. The substantial boom in e-commerce business is a huge positive and is likely to boost UPS’ September-quarter results too.

Notably, adjusted free cash flow surged 77.2% year over year in first-half 2020. The fact that the Zacks Consensus Estimate for current-year earnings has been revised 24% upward over the past 60 days reflects the optimism surrounding the stock.

(You can read the full research report on UPS here >>>)

Other noteworthy reports we are featuring today include Lockheed Martin (LMT), Square (SQ) and Colgate-Palmolive (CL).

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Sheraz Mian

Director of Research

Note: Sheraz Mian heads the Zacks Equity Research department and is a well-regarded expert of aggregate earnings. He is frequently quoted in the print and electronic media and publishes the weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here>>>

Today’s Must Read

Tesla (TSLA) Rides on High Demand for Model 3 Amid Cost Woes

Accretive Buyouts, Strong Balance Sheet Aid Mastercard (MA)

E-commerce Boom and Strong Free Cash Flow Boost UPS

Featured Reports

Robust Demand Aids Lockheed (LMT), F-35 program’s Cost Hurts

Per the Zacks Analyst, Lockheed Martin witnesses strong demand for its aircraft programs and missile defense systems.

Square (SQ) Banks on Solid Cash App Adoption, Bitcoin Growth

Per the Zacks analyst, Square is benefiting from strong Cash App engagement and its growing active customer base. Further, growing bitcoin revenues owing to robust Cash App are contributing well.

Colgate’s (CL) Innovative Product-Lines to Boost Top Line

Per the Zacks analyst, the re-launch of Colgate Total and Hill’s Science Diet, and expansion of Naturals and Therapeutics divisions highlight Colgate’s innovation efforts.

Bayer (BAYER) Focuses on Deals & Acquisitions Amid Competition

Per the Zacks analyst, Bayer has made several acquisitions and entered into a number of deals to boost its portfolio in the past few quarters.

Growth Investments Supports ABB Despite Weak Market Demand

Per the Zacks analyst, ABB’s organic growth investments along with diligent cost-cutting actions will boost its competency.

Biogen (BIIB) Focus on Aducanumab Amid Rising Competition

The Zacks analyst notes that approvability of Alzheimer’s drug, aducanumab, has improved after FDA granted priority tag to its BLA.

Chipotle (CMG) Banks on Sales-Building Efforts, High Costs Ail

Per the Zacks analyst, Chipotle’s increased focus on food safety and enhancing customer experience, along with various sales-building bode well. However, rise in food and labor costs woes linger.

New Upgrades

Work-From-Home & Online Learning Wave Aids Zoom Video (ZM)

Per the Zacks analyst, Zoom Video is benefiting from the coronavirus-induced remote working and Internet-based education wave.

America Movil (AMX) Rides on Acquisitions, Spectrum Strength

Per the Zacks analyst, strategic acquisitions and robust spectrum portfolio backed by cost-reduction initiatives are likely to elevate America Movil’s market position in the Latin American markets.

CDW Rides on Digital Shift, Remote Working Tools Demand

Per the Zacks analyst, CDW is benefiting from the ongoing digital transformation and increased demand for products that aid remote working and operation continuity plans amid the coronavirus crisis.

New Downgrades

Weak Sales of Beauty Products to Weigh on AptarGroup (ATR)

Per the Zacks analyst, reduced orders from customers providing prestige beauty products due to store closures and travel restrictions amid the coronavirus pandemic will weigh on AptarGroup’s results.

DXC’s Growth Prospects to be Hurt by Lower IT Spending

Per the Zacks Analyst, DXC’s growth prospects might be hurt by soft IT spending as organizations are pushing back their investments in big and expensive tech products amid the coronavirus crisis.

Timberland Diversity Aids Rayonier (RYN) Amid Choppy Market

Per the Zacks Analyst, Rayonier will benefit from its timberlands’ geographical diversity and better pricing power, though stiff competition and pandemic-led choppy market conditions remain concerns.

Click to get this free report

United Parcel Service, Inc. (UPS): Free Stock Analysis Report

Tesla, Inc. (TSLA): Free Stock Analysis Report

Square, Inc. (SQ): Free Stock Analysis Report

Mastercard Incorporated (MA): Free Stock Analysis Report

Lockheed Martin Corporation (LMT): Free Stock Analysis Report

ColgatePalmolive Company (CL): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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