Q4 2023 earnings scorecard and Arm bonanza Q4 2023 earnings scorecard and Arm bonanza Q4 2023 earnings scorecard and Arm bonanza

Q4 2023 earnings scorecard and Arm bonanza

Equities 5 minutes to read
Peter Garnry

Head of Saxo Strats

Summary:  With most S&P 500 companies having reported, the Q4 2023 earnings season is nearing its end. We can observe various winners and losers based on different metrics. Companies exceeding analysts' expectations tend to generate positive market sentiment and the top five surprises on revenue among large US stocks include NextEra Energy, General Electric, Eli Lilly, Linde, and Meta. In terms of revenue growth Eli Lilly, Meta, Microsoft, General Electric, and Uber lead the pack in terms of fastest revenue growth during the quarter.


The winners and losers in Q4

With around 70% of S&P 500 companies having reported earnings we are getting closer to the end of the Q4 2023 earnings season. The table below shows the winners and losers of the earnings season. Positive revenue surprises are often key indicators of future sentiment and here the top 5 surprises among the largest US stocks are NextEra Energy, General Electric, Eli Lilly, Linde, and Meta. In terms of revenue growth, the fastest growing companies are Eli Lilly, Meta, Microsoft, General Electric, and Uber.

NextEra Energy is the most valuable US utility company and is spearheading the transformation towards renewable energy developing and operating renewable energy assets, selling battery solutions, and EV charging stations. Many investors may not know the company, but it has grown to $28bn in revenue from just $18bn in 2020 delivering net income of $6.9bn in 2023. The company reiterated in its Q4 earnings release its commitment to deliver EPS growth of 6-8% annualized through 2026.

Sometimes analyst estimates do not reflect the true underlying estimates priced in the market and thus often the share price performance around earnings release can be a good way to gauge the winners and losers. Based on share price performance the three best earnings and guidance came from Meta, Netflix, and Amazon. On the negative side, the market was the most disappointed about earnings and outlook from Tesla, Alphabet, and McDonald’s.

Arm shares are defying financial gravity

The big winner yesterday was the chip design company Arm that went public last year. Arm reported better than expected earnings and listed its earnings guidance driven by huge demand for AI and smartphone makers putting more cores into phones. The company guides fiscal Q4 (ending 31 March) revenue of $850-900mn against estimated of $778mn. According to Arm management the AI boom is not hype and the cycle has just begun and is the most transformational technology of our lifetime. One of the key drivers going forward is that a lot of its customers are shifting to a new technology version called V9 which comes with almost double royalty rate. Arm’s IP is used in electric vehicles, smartphones, TVs and cameras. While Arm is naturally talking their book, which any investor should take with a grain of salt, the strong guidance was strong and instrumental in lifting sentiment.

However, it is important to recognize as an investor that the expected growth rate is “only 22%” in the fiscal year that ends in March 2025 and that the company is already at around 40% net profit margin. Investors are right willing to pay more than 2x forward operating earnings of that Nvidia which is one of the most hyped large cap stocks in the world. Arm is an impressive company but when valuations reaches these levels investors should be cautious. The 2021 technology hype cycle is a stark reminder of this.

Arm share price | Source: Saxo

Disclaimer

The Saxo Group entities each provide execution-only service, and access to analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Inspiration Disclaimer and (v) Notices applying to Trade Inspiration, Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular, no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/en-sg/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region

Singapore
Singapore

Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-sg/about-us/awards.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.