Earnings Spotlight: Meta and Apple Prepare to Report

As earnings season gains momentum, a diverse range of companies has recently released their quarterly results. The third quarter outlook is shaping up to be positive, with strong performances expected from the technology sector.

Among those set to report next week are key members of the Magnificent 7 group, including Apple and Meta Platforms.

META Shares Show Strong Performance

The stock of Meta Platforms has demonstrated remarkable strength throughout 2024, making it one of the standout performers in the Magnificent 7 group. Unlike some of its counterparts, which have seen their shares fluctuate, Meta has enjoyed a wave of bullish sentiment leading up to its quarterly announcement.

As of early October, the Zacks Consensus EPS estimate for this quarter stands at $5.17, reflecting a 2% increase since August and indicating an expected year-over-year growth of 18%. This positive outlook has contributed to Meta’s ranking as a Zacks Rank #2 (Buy).

Revenue projections are also on the rise, with estimates suggesting a 17% increase compared to the same period last year. A significant component of this revenue growth will likely be driven by the company's advertising performance, which has been bolstered in part by advancements in artificial intelligence.

Meta has consistently exceeded earnings expectations, with six consecutive positive surprises reported in its advertising results. Investors will be keen to hear more about the company’s AI strategy and capital expenditures during the upcoming earnings call.

In terms of valuation, Meta's forward 12-month earnings multiple is currently at 23.7X, close to its five-year median of 22.1X, and well below its five-year highs of 31.5X. The PEG ratio stands at 1.2X, aligning with historical averages and significantly lower than its five-year peak of 2.9X.

Apple's Earnings Anticipation

In contrast, recent expectations for Apple have been slightly tempered, following downward revisions reported in early October. The current Zacks Consensus EPS estimate sits at $1.54, suggesting a modest 5% growth year-over-year.

The spotlight during Apple’s next earnings report will undoubtedly be on the performance of the iPhone, which typically takes center stage. Investors will be looking for insights into the new iPhone 16 as well as the AI capabilities that Apple has been promoting in recent months.

Historically, Apple has outperformed expectations with its iPhone results, achieving above-consensus results in two of the last three quarters.

However, from a valuation perspective, Apple appears somewhat stretched. Its forward 12-month earnings multiple of 30.3X exceeds the five-year median of 26.3X, although it remains below the five-year peak of 36.1X. Additionally, the PEG ratio is currently at 2.4X, higher than the five-year median of 2.2X. Despite these elevated valuations, investors continue to show confidence in Apple, driven by the company's strong fundamentals.

Conclusion

Next week, earnings reports from notable companies like Apple and Meta Platforms will kick off the quarterly reporting cycle for the broader Magnificent 7 group. Investors will be closely monitoring Meta’s insights on capital expenditures and advertising performance, while Apple’s report will focus on iPhone sales and AI developments.

earnings, meta, apple