Magnificent 7 Companies Reign Superior with Solid Earnings Results Magnificent 7 Companies Reign Superior with Solid Earnings Results

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Weโ€™ve seen awe-inspiring results from three major players in the stock market: Microsoft MSFT, Meta Platforms META, and Amazon AMZN, solidifying their position as leaders in this domain. These companies, along with their counterparts in the โ€˜Magnificent 7โ€™ group of stocks โ€“ Apple AAPL, Alphabet GOOGL, Tesla TSLA, and Nvidia NVDA โ€“ led the market to new heights last year, and this momentum has continued in the current year.

Despite a disappointing performance by Tesla, reflecting the fourth consecutive quarter of unsatisfactory results, all other members of the โ€˜Mag 7โ€™ that have reported have posted impressive growth numbers. Although the market was not particularly impressed with the Alphabet and Apple reports, they still managed Q4 earnings growth of +51.8% and +13.1%, respectively.

On the contrary, Teslaโ€™s earnings slumped by -45.8% in Q3, with a mere +3.5% increase in revenues, as the EV-maker continued to grapple with weakening margins in an increasingly competitive EV market.

The one-year performance of the Magnificent 7 stocks relative to the S&P 500 index and Tesla is depicted in the chart below:

Zacks Investment Research
Image Source: Zacks Investment Research

The chart below illustrates the January 2024 performance of this distinguished group:

Zacks Investment Research
Image Source: Zacks Investment Research

Utilizing estimates for Nvidiaโ€™s upcoming December-quarter results on February 21st, along with the actual results for the other six members, the total Q4 earnings for the group are expected to surge by +48.7% from the same period last year, on +14.5% higher revenues.

The chart below demonstrates the groupโ€™s Q4 earnings and revenue growth performance in the context of the previous quarter and the expected performance for the next three quarters:

Zacks Investment Research
Image Source: Zacks Investment Research

The groupโ€™s earnings and revenue growth picture on an annual basis is depicted in the chart below:

Zacks Investment Research
Image Source: Zacks Investment Research

Itโ€™s important to note that the Mag 7 companies currently account for 28.6% of the S&P 500 indexโ€™s total market capitalization and are expected to contribute 19.5% to the indexโ€™s total earnings in 2024. For 2023 Q4, the Mag 7 group held a weightage of 23.1%, contributing to 23.1% of all S&P 500 earnings.

The chart below shows the groupโ€™s earnings contribution to the index over time, as well as the current expectations for the next two years:

Zacks Investment Research
Image Source: Zacks Investment Research

Given their significant earnings power and growth profiles, itโ€™s hard to deny the market leadership exhibited by this group. Importantly, analysts had been revising their estimates for the group even before the December-quarter results, and these numbers are now contributing to the positive revision momentum.

Looking beyond these mega-cap players, the total Q4 earnings for the Technology sector as a whole are anticipated to surge by +24.2% from the same period last year, on +8.1% higher revenues.

The chart below presents the sectorโ€™s Q4 earnings and revenue growth expectations in the context of recent quarters and the expected growth in the coming periods:

Zacks Investment Research
Image Source: Zacks Investment Research

The Earnings Big Picture

The chart below displays the achieved earnings and revenue growth rates over the preceding four quarters, along with the current earnings and revenue growth expectations for the S&P 500 index for 2023 Q4 and the following three quarters:

Zacks Investment Research
Image Source: Zacks Investment Research

This weekโ€™s groundbreaking Tech results have bolstered the overall aggregate earnings growth of the S&P 500 index to +4.3%, an increase from last weekโ€™s +1.1% growth rate. Excluding the contribution from the Mag 7 stocks, Q4 earnings for the rest of the index would be down by -4.2%, as shown in the chart below:

Zacks Investment Research
Image Source: Zacks Investment Research

The chart below illustrates the earnings picture on an annual basis:

Zacks Investment Research
Image Source: Zacks Investment Research

Q4 Earnings Season Scorecard

With results from 230 S&P 500 members released through Friday, February 2nd, we have witnessed Q4 results from 46% of the indexโ€™s total membership.

This upcoming week boasts over 500 companies set to report their results, including 106 S&P 500 members. The lineup is impressive and includes big players such as Disney, Elli Lilly, MacDonalds, DuPont, Caterpillar, Ford, Pepsi, Chipotle, Uber, PayPal, and Expedia, among others.

The 230 index members that have reported already have seen a +4.2% increase in total Q4 earnings from the same period last year, with +2.8% higher revenues. 81.3% of companies have surpassed EPS estimates, and 63.9% have exceeded revenue estimates.

The comparison charts below offer historical context for the Q4 earnings and revenue growth rates:

Zacks Investment Research
Image Source: Zacks Investment Research

Similarly, the following comparison chart provides historical context for the Q4 EPS and revenue beat percentages:

Zacks Investment Research
Image Source: Zacks Investment Research

For a detailed look at the overall earnings picture, including expectations for the coming periods, please check out our weekly Earnings Trends report >>>>

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