3 Stocks in the S&P 500 to Keep an Eye on During This Earnings Season

Earnings season has always been a highly anticipated period for the financial markets, closely monitored by traders and market analysts. During this season, companies host conference calls to share the company’s performance, results, and field questions from analysts on Wall Street. 

In this article, we examine three stocks in the S&P 500 to watch for during the upcoming Q2 earnings season.

Top 3 Stocks in the S&P 500 and Their Earnings Report

The three stocks listed in the table below are selected based on their significant weightage in the S&P 500. It is important to note that each company sets its own fiscal year-end, which determines the start and end dates for their financial reporting periods. Consequently, companies may have different fiscal years from one another, leading to variations in their quarterly report release dates and fiscal quarters.

Table 1: Companies and their % weighting in the S&P 500 Index. The data above are as of 2 May 2023 referenced from Investopedia website ^[1].

1. Apple Inc (NASDAQ:AAPL)

Apple Inc started from humble beginnings in the Jobs family garage in 1976 when it was founded by Steve Jobs and Stephen Wozniak, with the vision of making computers more accessible and user-friendly. Despite facing near-bankruptcy in the 90s, Steve Jobs successfully turned the company around by introducing the iPhone in 2007, revolutionising the smartphone industry and transforming people’s perception of mobile devices. 

Apple has since expanded its offerings beyond iPhone devices, selling a diverse range of product lines, including iPads, Macs, and Apple Watches. While Apple’s market capitalisation has generally remained above $2 trillion, it fell below this threshold on 3 January 2023, after the release of its latest earnings report ^[2].

Here’s a table comparing Apple’s Q2 earnings results for its fiscal second quarter of 2023, which ended on 1 April 2023, with its Q1 earnings results:

Table 1: Apple’s Q1 and Q2 earnings results ^[3,4]

Apple’s financial performance in Q2 2023 revealed a marginal decline in earnings compared to the preceding quarter. Revenue experienced a 5.7% downturn, and EPS also decreased by 4.4% as per the table above. These results can be attributed to several factors that affect the macroeconomy, including ongoing geopolitical tensions such as the war in Ukraine and the persistent issue of rising inflation ^[5].

Despite this slight setback, Apple demonstrated resilience by achieving commendable revenue and earnings figures. The cornerstone of their success remained their flagship iPhone business, accounting for a substantial 54% of total revenue for the quarter ^[6]. Additionally, Apple’s services business showcased significant growth, notching a record $19.8 billion in sales for the quarter, with a year-over-year revenue increase of 17% ^[7]. 

The day after the earnings announcement, Apple’s stock price experienced an increase of over 5%, resulting in a significant boost of $135 billion to the company’s market value ^[8].

Apple recently hosted the 2023 Worldwide Developers Conference (WWDC) from 5 – 9 June 2023. During this event, Apple introduced their new augmented reality headset, the Vision Pro VR, aiming to compete with popular devices such as the Meta Quest 3 and PlayStation VR2 ^[9]. Additionally, Apple announced the release of the 15-inch MacBook Air, as well as the Mac Studio and Mac Pro, all powered by the cutting-edge Apple M2 Ultra chip ^[10]. This new chip offers a remarkable six-fold increase in speed compared to the fastest Intel-powered Mac Pro. With the recent introduction of innovative products like the Vision Pro VR headset and the powerful Mac Studio and Mac Pro, traders are anticipating the impact of these offerings on Apple’s upcoming earnings season.

2. Microsoft Corp (NASDAQ:MSFT)

Much like Apple, Microsoft Corporation also started in a garage in Albuquerque in 1975, founded by Bill Gates and Paul Allen. Their goal was to put a computer in every home and on every desk. They sold their first product, Altair BASIC, a new programming language for the Altair 8800 microsystem in the same year. By the end of 1978, the company had sales of over $1 million with just 13 employees ^[11]. 

The release of Windows 95 was a game-changer, transforming the personal computing industry and how people interacted with computers. In 2023, Microsoft announced its collaboration with OpenAI to unlock the AI-powered Bing search engine and Edge browser, which act as a user’s copilot for their web searches ^[12].

Here’s a table comparing Microsoft’s Q3 earnings results for its fiscal third quarter of 2023, which ended on 1 April 2023, with its Q2 earnings results:

Table 2: Microsoft’s Q2 and Q3 earnings results ^[13,14]

In the Q3 earnings results of Microsoft, the company reported a slight increase in earnings compared to the previous quarter. The company achieved a 7% increase in revenue and a 10% growth in EPS which can be attributed to various factors, including the strength of Microsoft’s cloud business, which generated $28.5 billion in revenue – a remarkable 22% year-over-year increase ^[15]. 

Additionally, Microsoft’s Productivity and Business Processes segment showcased significant growth, recording a record-breaking revenue of $17.5 billion, marking an impressive year-over-year increase of 11% ^[16]. Despite facing minor challenges in its personal computing segment, which saw a revenue decrease of $1.3 billion or 9%, Microsoft managed to achieve an overall positive increase in revenue ^[17]. Following the earnings announcement, Microsoft further demonstrated its financial strength in the market by returning $9.7 billion to shareholders through share repurchases and dividends of $0.68 per share ^[18].

In March 2023, Microsoft announced the addition of a Copilot AI assistant, which will be integrated directly into Windows 11 and found from the task bar ^[19]. The purpose of the Copilot AI is to empower every user and help them personalise their settings, and seamlessly connecting with all their favourite apps. The Windows Copilot also goes a step further, offering features such as content summarisation, rewriting, and even explanations. As the next earnings season approaches, the recent product announcements and technological advancements will be closely observed, given that they could potentially impact the company’s financial performance.

3. Amazon.com Inc (NASDAQ:AMZN)

Amazon.com Inc, founded by Jeff Bezos in 1994, marked its beginnings in the garage of Bezos’s home in Bellevue, Washington. The online marketplace was launched as Jeff Bezos spotted the tremendous growth potential of e-commerce with a focus on books, owing to their universal demand, manageable shipping requirements, and the wide range of titles. 

Today, Amazon has grown beyond its original purpose, offering various services such as Amazon Web Services (AWS), Prime Video, and Alexa-powered devices. AWS provides cloud computing services, allowing users to rent storage and computing resources over the internet. According to Statista, in the fourth quarter of 2022, AWS controlled 32% of the entire cloud infrastructure service market ^[20].

Here’s a table comparing Amazon Q1 earnings results for its fiscal first quarter of 2023, which ended on April 1, 2023, with its Q4 2022 earnings results:

Table 3: Amazon’s Q4 2022 and Q1 2023 earnings results ^[21,22]

In the Q1 2023 earnings results of Amazon, the company reported a decrease of 14.6% in earnings compared to the previous Q4 2022 earnings results as per the table above. The company experienced a decline of 14.6% in revenue but a remarkable growth in EPS which can be attributed to various factors. The overall net income also grew significantly which is driven by sales increases in different segments.

The North America segment saw an 11% year-over-year sales increase to $76.9 billion, while the international segment had a 1% year-over-year sales increase to $29.1 billion ^[23]. The AWS segment also performed well, with a 16% year-over-year sales increase to $21.4 billion ^[24]. Furthermore, Amazon reported a substantial increase in operating cash flow, a jump of 38% to $54.3 billion for the trailing twelve months compared with $39.3 billion for the same period in the previous year ^[25]. 

In April 2023, AWS introduced new machine learning tools, including Amazon Bedrock which simplifies the development and scaling of generative AI applications for customers. Another addition is CodeWhisperer, a free tool praised for its accuracy, speed, and security in generating code for AWS services. A productivity challenge showed that CodeWhisperer users completed tasks 57% faster on average and had a 27% higher success rate compared to non-users ^[26]. 

With all the buzz surrounding AI in recent months, these announcements on Amazon’s new machine learning tools could be of interest to investors and traders alike.

Trading during the earnings season

Earnings season presents an opportunity for traders to analyse and react to the financial reports released by companies for a given quarter. With the information disclosed during earnings season, traders can adjust their strategies and make informed decisions accordingly. Additionally, the news surrounding the company’s new product launches or services can influence market sentiment and shape expectations for its future performance. Traders often take these factors into consideration when evaluating their trading positions. 

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