By Clement Thibault
After Wal-Mart's Q4 report this past Thursday, the earnings season is considered over, albeit unofficially. At this point, the majority of large cap companies have all provided public insight into their businesses, their problems and their profits. Now that everything has been revealed—at least as much as we're going to get from the big guys—it’s time to hand out the first quarterly Investing.com Mega Cap Awards.
For transparency, we consider Mega Caps to be companies with a market cap of $200B or greater. That leaves 14 contenders – Apple (O:AAPL), Alphabet (O:GOOGL), Microsoft (O:MSFT), Exxon Mobil Corporation (N:XOM), Facebook (O:FB), General Electric (N:GE), Wells Fargo (N:WFC), Amazon (O:AMZN), AT&T (N:T), Procter & Gamble (N:PG), Wal-Mart (N:WMT), JPMorgan Chase (N:JPM), and Verizon (N:VZ).
We'll be handing out 7 different awards—everything from the 'Biggest Revenue Surprise' to the overall Q4 Earnings Season winner. For each category, we'll mention the three best performers.
And so, the envelopes please:
1. Biggest Revenue Surprise
Known by some as the "Revenue forecast? Puh-leez…" award, this prize is given to the company which had the biggest, most unexpected revenue beat in Q4. And the winner is… Exxon Mobil.
That's is not to say the company has done particularly well this past quarter. Its revenue is down 27% percent from Q4 2014, but it is worthwhile mentioning that while the revenue estimates stood at $51.36B, Exxon managed to come in considerably higher, at $59.81B, or 16.43% more than previously thought.
That's quite an achievement given the current, ongoing bearish conditions in the commodities market—and in particular the total collapse now going on in oil patch.
Honorable mentions go to:
- Facebook, which beat revenue expectations by 8.75%, with $5.84B vs $5.37B expected.
- JP Morgan, which posted revenues of $23.74B vs $22.9B expected, a +3.67% surprise.
2. Biggest EPS Surprise
This "I make way more money than you think" award goes to the company that managed not only to grow its revenue, but to also keep its costs in check, thus hanging on to a bigger piece of the profit pie for themselves. Keep in mind that we are talking about Mega Caps here, very public companies with established and relatively transparent business models—so big surprises don't come about so easily.
And yet, one company managed to surpass its expected EPS by an incredible 16.18%. The winner in this category is… Facebook which, thanks to an impressive growth in mobile ad sales, managed to post quarterly results of $0.79 EPS versus an expected $0.68.
Honorable mentions go to:
- Microsoft, with an EPS of $0.78 vs estimates of 0.71, an upside surprise of 9.86%.
- Alphabet, which reported an EPS of $8.67 against a predicted $8.1, or 7.04% more than anyone thought.
3. Biggest Jump in Price Following Earnings
Sometimes called the "Shareholder Pleaser Award", this accolade recognizes the company whose stock soared the highest after reporting Q4 earnings, giving traders and longtime investors an opportunity to cash in immediately on the company's performance. Such opportunities are all too rare in the realm of Mega Caps, since these companies seldom gain more than a few percentage points during any given trading session.
In order to determine the victor in this category, we've calculated the share price hike from the close immediately before the earnings report, to the highest price attained during the following trading session. Not surprisingly, this award is directly correlated to results for the best EPS performer—Facebook. Facebook reported after the bell on Wednesday, January 27th, when its share price closed for the day at $94.45. The report worked its magic—the stock opened at $107.2 on Thursday, and reached $110.34, its highest point, that same day, an increase of $15.89, or 16.82%!
Honorable mentions go to:
- Microsoft, with a 5.84% share price hike, from $52.05 to $55.09 during the next session.
- Alphabet, whose stock rose by $39.58 from $770.77 to $810.35 right after the report, or 5.12%.
4. The Biggest of the Biggest
It's always a fierce battle for the "Ultra Mega Cap" award. By far the most watched and contested honor, the winner garners tons of prestige, pride and media attention. We are talking, of course, about the largest publicly traded company by market capitalization in the world.
Apple has dominated this category since 2011 when it knocked Exxon off that pedestal, but a new contender reared its head during this earnings season, with Alphabet leading the charge to claim the title from Apple. On Tuesday, January 26th, before Apple's earnings report, its market cap stood at $554.4B. One day and one earnings call later, Apple's market cap slipped to $517.97B, only $36.57B ahead of Alphabet.
Alphabets' earnings on the other hand had the opposite effect. On February 2nd Alphabet dethroned Apple when it reached a market cap of $525.87B compared to AAPL's $523.85B. Unfortunately for Alphabet, its tenure at the top was very short—Apple reclaimed the title a day later, and continues to hold it as of this writing. So, with a current market cap of $532.5B, Apple remains king of hill.
Honorable mentions go to:
- Alphabet: Though it put up a valiant, though ultimately meaningless fight for the title, it currently stands at $489.69B
- Microsoft: Briskly trying to keep up and not too far behind at $409.86B.
5. Biggest Revenue Growth, YoY
Growth is a tricky thing for mega caps. Investors tend to get used to a certain healthy pace when it comes to revenue growth—and that's something that's neither realistic nor sustainable for companies already worth over $200 billion. The "Big but look, we're getting bigger" award goes to the company which took itself to another level during the past year, resulting in its most significant revenue gain since Q4 2014.
It's said that if you're not going forward, you're going backward, thus the importance of growing sales and revenue. The company which has made the most impressive strides in this arena is Facebook, with revenue of $5.84B for Q4 2015, compared to $3.85B for the last quarter of 2014. That's a colossal 51.69% revenue increase—which goes to show that FB still has quite a bit of room to monetize, and capitalize, its social platforms.
Honorable mentions go to:
- Alphabet, which saw its revenue jump from $14.48B in Q4 2014 to $21.32B in Q4 2015, an increase of 47.24%.
- AT&T, whose revenue climbed from $34.43B to $42.11B, or 22.31%, YoY.
6. Biggest EPS growth
Many think of this as the "Revenue is nice, but show me the money" award. Its level of importance closely resembles the Best Picture Oscar given at the Academy Awards. It's arguably the most coveted award of all.
A number of factors go into determining EPS, as this metric reflects a company's total revenue minus all expenses, and captures the performance of the company in a single number. And in an era when the P/E ratio is a critical component for evaluating a company—particularly when some companies are traded at hundreds of times their current earnings—EPS becomes even more significant. The winner in this category is one of these companies, with a pre-earnings P/E ratio of 418. Even though its YoY EPS has more than doubled, it still failed to live up to Wall Street's EPS expectations.
That company is Amazon, which saw 122.22% growth in earnings per share, from $0.45 to $1. Amazingly, the company still missed its EPS estimation of $1.56 by 35.9%. Expectations for Amazon are extremely high, with estimates calling for it to reach a reasonable P/E ratio of 28.66 in 2018. In order to justify its price, AMZN earnings will have to grow even faster than its award winning pace.
Honorable mentions go to:
- Facebook, with a 46.3% growth in EPS, from $0.54 to $0.79.
- Alphabet, with a jump of $1.79 per share, from $6.88 to $8.67, or 22.02%.
And the Q4 2015 Overall Winner is…
If you’ve read this far, you already know who the big winner is. Without question, Facebook has been the most successful company coming out of this earnings season. It received 3 of our top 6 awards, along with 2 second place finishes. Facebook is the Michael Phelps of Q4; medaling in almost every category it has competed in. Granted, Phelps won 8 gold medals in the 2008 Olympics, but it's equally unheard of for one Mega Cap to single-handedly outshine all of its gargantuan competitors. Facebook is therefore unrivaled in this season's earnings, making it the biggest winner of the Q4 2015 season.
Looking ahead to Q1 2016, Facebook remains primed to continue its growth. Still, as we've seen with Amazon, rapid growth doesn't mean a lot if it doesn't meet Wall Street's expectations. Analysts have taken note of Facebook's recent surprise, however. Over the past 4-weeks alone, we have seen 25 revisions to its estimated revenues and 26 revisions of its expected earnings for the next quarter.
The consensus EPS forecast for Facebook is now $0.62, which would require the company to outdo itself again, and grow by more than 45% for the second straight quarter in a row, from the $0.42 EPS it posted on Q1 2015.
Facebook may surprise yet again, but perhaps not. And Wall Street doesn't like to be fooled twice.