Big Tech Just Added to a Shrinking Forecast, but Maybe Bob Iger Can Brighten the Mood
Analysts are reducing annual projections faster than any year since 2016, and that was before $Apple(AAPL)$
Wall Street's expectations for 2023 have been diving as forecasts for the new year come in light, and the news could get worse once they factor in disappointing results from Big Tech. But at least Bob Iger is coming back for a sequel.
Google, Facebook, Amazon and Apple all disappointed with holiday earnings this week. Their forecasts ranged from nonexistent to piecemeal to meh, and the fallout will only add to the biggest dive in Wall Street's expectations through the beginning of a year since 2016.
Analysts' average forecast for 2023 earnings from the S&P 500 index dropped by 2.5% in January, according to FactSet Senior Earnings Analyst John Butters, the worst in seven years. Those projections began heading lower last year, and the decline is only steepening -- analysts are now projecting 3% earnings growth in 2023, and that is contingent on a big holiday rebound from the results being released this quarter.
The news was even worse for the first quarter, for which projections declined 3.3% in January as companies whiffed on their forecasts at a rapid pace: 86% of the 43 companies that have guided for first-quarter earnings have missed projections, Butters reported. Earnings are now expected to decline 4.2%, which would be the first year-over-year earnings decline since the third quarter of 2020, when the COVID-19 pandemic write-offs started to come in.
Big Tech only added to the downward trajectory in recent days. Amazon.com missed on its holiday earnings as well as its forecast for the first quarter, and that company could determine if S&P 500 profits rise in 2023 all on its own. Amazon's worst holiday earnings since 2014 could also contribute to the consumer discretionary sector's first earnings decline since the beginning of the pandemic, with holiday sector earnings now expected to drop more than 5%.
Google parent Alphabet and Facebook parent $Meta Platforms, Inc.(META)$ also missed their respective earnings targets amid problems with the digital-advertising industry, leading to the communications-services sector having the worst earnings season in the S&P 500. Profit has declined 25.2% in that sector so far, the worst among the 11 S&P 500 sectors, but would be down just 6.5% without the effects of Meta and Alphabet, Butters reported.
Apple also didn't do projections any favors, reporting its biggest sales decrease since 2016 and an earnings miss Thursday afternoon. In a piecemeal forecast, executives projected a similar sales decline in the calendar first quarter, though unofficially.
After the busiest week in earnings season wrapped up, don't expect much of a breather -- 95 S&P 500 companies are expected to report in the week ahead, the third consecutive week with at least 90 companies reporting.
Only one Dow Jones Industrial Average stock will report, but that is the Wednesday call you will want to tune in for: Bob Iger's return to the $Disney(DIS.US)$ earnings show.
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