Author: Gary Ashton
Estimated read time: 3 minutes
Publication date: 8th Dec 2019 22:01 GMT+1
Third-quarter earnings season rolls on this week with some heavy hitters in the US tech sector. Specific names lined up to report after the market close on December 12th are Adobe Inc (NASDAQ: ADBE), Broadcom Inc (NASDAQ: AVGO) and Oracle Corp (NYSE: ORCL). The tech sector, measured using the Technology Select Sector SPDR ETF (AMEX: XLK), has performed very well this year. It is up 41.5% year-to-date in 2019, providing an excess return over the broader S&P 500 equity index of 16.2%. This tech sector ETF is up 77.76% over the last three years, and 112.90% over five years.
This performance has far exceeded other S&P 500 sectors in 2019. The next closest is the Financial Select Sector SPDR ETF (AMEX: XLF), which provides an excess return of 3.93% year-to-date.
Some Wall Street analysts, however, are concerned that the price action in the tech sector is getting ahead of fundamentals. For example, analysts have revised down quarterly earnings estimates for all three stocks named above in the last three months by 1.06%, 1.14%, and 4.88%, respectively. Oracle suffered the most substantial downward revision to quarterly estimates. Analysts now expect the company to report earnings per share (EPS) of $0.78, which is still a $0.04 increase from the reported figure in the same quarter the previous year.
Both Broadcom and Oracle disappointed for the first time in the last two years of quarterly reporting with negative earnings surprises of 2.68% and 1.39%, respectively, in the previous quarter this year. Investors will be closely watching this week’s earnings for clues to performance in 2020.
Analysts currently have a HOLD rating on Oracle, which is the same recommendation as three months ago. On the surface, Oracle looks slightly undervalued with a PE ratio of 18.2x compared to the median S&P 500 stock at 22.5x. The company pays an annual dividend of $0.96 per share, which equals a yield of 1.73% at current prices (in line with 10-year US Treasuries). Oracle’s dividend payout ratio of 27% is low relative to other S&P 500 stocks but is unlikely to improve soon.
Use Finscreener’s Earnings Calendar to Follow the Action
You can follow all the results using our Earnings Calendar. To see the same three tech stocks mentioned in this blog, choose “S&P 500” from the market down in the upper left of the page. If not already selected, choose “This Week” in the middle of the page on the left. Finally, to filter down our names, select “Large ($10bn - $200bn)” from the market cap filter just under the market down in the upper left of the page. You should be able to see the same three stocks mentioned here when finished.
Disclaimer: The writer is an experienced financial consultant who writes for Finscreener.org. The observations he makes are his own and are not intended as investment or trading advice.
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