The third-quarter earnings season is winding down, but that doesn’t mean the fireworks are over.
We’ve now received Q3 results from more than 90% of S&P 500 index members. Total earnings for these companies that have reported are up 7.1% from the same period last year on 5.5% higher revenues. On a ‘blended’ basis that includes the still-to-come companies, S&P 500 earnings are expected to rise 7.4% from the year-ago period on 5.6% higher revenues.
The outcome speaks to a resilient corporate backdrop, as companies continue to grapple with economic uncertainties and a higher interest-rate environment. It wasn’t too long ago that recession fears were swirling around Wall Street, but those reservations have mainly dissipated amid former President Trump’s recent victory and record highs in the stock market.
Remember, stocks are one of the best leading indicators on the economy. Corporate earnings growth is expected to accelerate in the coming quarters at a double-digit pace following the modest growth in the third quarter.
Shopify Highlights Tuesday’s Earnings Movers
One company stood out on Tuesday morning, as its individual stock spiked after delivering a beat on both the top and bottom lines. E-commerce platform provider Shopify SHOP doubled its net income during the third quarter to $344 million, topping estimates of $332 million. The company has exceeded the earnings mark in eight consecutive quarters.
Revenues jumped 26% from the same period last year to $2.16 billion, ahead of the $2.11 billion Zacks Consensus Estimate. Gross merchandise volume from merchant transactions surged 24% to $69.71 billion, also ahead of estimates.
Shopify, which provides a cloud-based, multi-channel platform that assists businesses in selling products and services, has been taking advantage of the artificial intelligence theme by rolling out several related features. Shopify Dashboard, which is available in more than 20 languages, enables merchants to manage products and inventory, process orders and payments, build customer relationships, and leverage data analytics.
Adding to the bullish theme, Shopify guided above expectations for the current quarter. Management stated that they expect “revenues to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.” The Q4 Zacks Consensus Estimate for Shopify revenues calls for 22.2% growth at the time of this writing.
Shares of Shopify, which are currently a Zacks Rank #2 (Buy), had been lagging the market this year heading into this morning’s announcement. But the stock was beginning to show signs of relative strength over the last few months, rising above key technical levels. The prior underperformance is transforming in swift fashion as SHOP stock surges more than 20% on its Q3 results. Shares are now up more than 40% this year:
Image Source: StockCharts
Leading Mediterranean Restaurant Chain to Report After the Bell
Popular, fast-casual restaurant brand Cava Group CAVA is slated to report its Q3 results after the close on Tuesday. The company is expected to post a quarterly profit of $0.11/share, which would mark an 83.3% improvement from the same period last year. Estimates for the quarter have remained steady over the past 60 days.
Third-quarter sales are projected to come in at $235.1 million, hinting at a nearly 34% surge. A Zacks Rank #2 (Buy) stock, CAVA hasn’t missed on the earnings (or sales) mark since last year’s IPO. The company boasts an impressive 257.7% average earnings surprise over the last four quarters.
CAVA stock has been one of the big market winners this year as shares have surged more than 240%:
Image Source: StockCharts
Our proprietary Zacks Earnings ESP indicator does not conclusively predict another beat for CAVA. Keep in mind that stocks can be extremely volatile surrounding earnings announcements.
Disclosure: Shopify is a current holding in the Zacks Headline Trader portfolio.
5 Stocks Set to Double
Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Today, See These 5 Potential Home Runs >>Shopify Inc. (SHOP) : Free Stock Analysis Report
CAVA Group, Inc. (CAVA) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
