Tech earnings may boost market in flux 

Move over, underperforming banking sector. This week, major players in the tech space will report second-quarter results, and it could be a boost to a direction-seeking market in flux.

Analysts project the tech sector will have a 12.3% growth rate for the second quarter: the highest growth rate of all 10 Standard & Poor’s 500 sectors, according to Thomson Reuters data. Not bad, considering that the first quarter was less than stellar.

Big S&P 500 tech movers Google, Yahoo and Intel are expected to post significant growth in earnings per share (EPS) compared with the same quarter a year ago.

Analysts say tech bellwether Intel may report a surging 34.2% growth in EPS, up about 13 cents to 52 cents from its second quarter last year, according to Thomson Reuters.

Internet search giant Google is expected to boast a projected 30.8% growth increase, boosting its EPS to $6.25 from $4.78 in the second quarter last year. The reason: Despite underperforming in the second quarter of 2013 due to international privacy concerns, analysts say Google is expected to make a comeback from increasing its Internet spending and ad revenue.

Smartphone chip demand appears to be spearheading the majority of projected growth for many semiconductor companies, such as Intel and SanDisk.

“Many tech companies before (in past earnings seasons) suffered from PC sales going down,” Greg Harrison, Thomson Reuters senior research analyst, told the Business News Network. “Now they’re benefiting from smartphones, which use many of their chips.”

Internet software and services companies are also benefiting from increased mobile ad revenue. EBay and Facebook, among others, may attribute a fair portion of their growth to mobile ad spending, said Harrison.

Elsewhere for the second quarter:

• Energy: Thomson Reuters predicts the sector will post the second-highest growth for the S&P 500 at 10.5%. Despite an expected decrease in performance from the coal and consumable fuels sector, refineries and energy technology companies will likely bolster growth, said analysts.

• Manufacturing: General Electric, which will release its earnings report on Friday, is projected to have a 9.1% growth increase, up to 39 cents from 36 cents in the same quarter a year ago, according to Thomson Reuters.

• Health care: Thomson Reuters predicts the health care sector will post 8.8% year-over-year growth, led by the health care facilities and biotechnology subsectors. With the implementation of the Affordable Care Act, the health care sector is expected to have the highest revenue growth for the second quarter at 8.4%, analysts said.

• Banking: Among all the 10 S&P 500 sectors, the finance industry is expected to encounter the largest drop, decreasing by 3.5%, according to Thomson Reuters projections.

Citigroup, JPMorgan Chase, Bank of America, Fifth Third Bancorp and Capital One are all reporting earnings this week, among other banks.

With the housing market still in tepid recovery, many financial companies’ mortgage departments are still risk-averse, still tightening mortgage qualifications for lower-income groups, analysts said. In addition, many banks are working to offset higher costs from new regulatory and compliance measures.

Many of the investment banks are also hurting from reductions in fixed-income trading, Harrison said.

On Friday, Wells Fargo unveiled the first wound of the finance sector for the second quarter, reporting a 3.2% decrease in earnings compared with its second quarter a year ago. The report marked an end to the bank’s 17 consecutive quarters of rising profits.

As of Friday, 27 companies in the S&P 500 have posted second-quarter results: 55.6% have beat analyst EPS expectations and 66.7% have reported revenue that exceeded analyst predictions, according to Thomson Reuters data.

 

Source: Usatoday

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