Today was a big earnings day and four of the bellwether stocks reporting beat Wall Street expectations on earnings for the first quarter. Will those beats be enough for the market tomorrow or will we get a sell on the good news reaction?
Here are the results, the after-hours reaction,and my preliminary quick take:
Alphabet (GOOG) beat Wall Street estimates by 35 cents a share. Earnings came in at $7.73 a share. Revenue climbed 22% year over year to $24.75 billion versus the Wall Street consensus of $24.18 billion. That’s not a huge beat on revenue but it’s still a beat. The higher than expected earnings were a result of an increase in operating margin to 27% from 26% in the first quarter of 2016. The effective tax rate declined to 20% from 22% in the fourth quarter. Ad revenue was up strongly to $21.4 billion from $18.02 billion. Aggregate paid clicks climbed by 44% year over year. The one negative was the continued drop in cost per click, which fell 19% from the first quarter of 2016. This isn’t really a surprise–mobile clicks, an increasingly large percentage of the whole, don’t bring in as much as desktop clicks. The stock, a member of my long-term 50 Stocks portfolio, was up 4.55% in afterhours trading. Just about everything in this report argues that the stock should move higher tomorrow. (But it is a Friday…)
Amazon (AMZN), another member of my long-term 50 Stocks portfolio, beat by 38 cents a share (reporting earnings of $1.48 a share) and beat on a 22.6% year over year growth in revenue. Wall street was expecting $35.31 billion and the company reported $35.71 billion. Operating income was $1 billion versus the $900 million consensus. Amazon Web Services, the company’s cloud division, continued to tear up the track with revenue climbing 43% year over year to $2.8 billion. The market responded positively in after-hours trading with shares of Amazon gaining 3.68% The one problem that I see that could lead to some selling on the good news tomorrow is that the company’s guidance for the second quarter was light on revenue with Amazon calling for revenue of $35.25-$37.75 billion versus the Wall Street estimate of $36.92 billion.
Microsoft (MSFT) beat the Wall Street consensus on earnings by 3 cents a share at 73 cents a share and reported revenue up 6.3% year over year to $23.56 billion, essentially in line with the $23.62 consensus. In after-hours trading the stock was off 1.54% and I suspect that is a reaction to somewhat disappointing revenue growth in the company’s cloud units. It’s hard to get a single number to put on cloud revenue because of the way that Microsoft reports but here are some of the many numbers. Revenue from the intelligent cloud business was up 11%. Server products and cloud services revenue climbed 15%. Office commercial products and cloud services revenue gained 7%. The one real standout was revenue from Azure, the company’s lead cloud product, where revenue grew by 93%. At the time I posted this I didn’t have guidance for the March quarter. Microsoft said it would provide that in the conference call.
Intel beat by a penny and reported in-line revenue with revenue growth of 8% year over year. The company did raise guidance for the March quarter to 63 to 73 cents in earnings per share versus the Wall Street consensus of 64 cents a share. Intel also raised its guidance for the full year by 5 cents a share on earnings to $2.85 a share. The stock sold off fairly strongly in after-hours trading, dropping by 3.85%. I think Wall Street was hoping for a bigger beat than a penny and decided to take some profit on the news. Intel’s shares were up 5.14% in the last month. At least that’s how I see the results right now.