Tech giants’ annual earnings are expected to surge in 2014

In few days the most important tech giants will be disclosing their full-year 2013 earnings report results and share their initial predictions for this year, which will directly influence Wall Street’s share prices in the sector.

The predictions

It is expected that in 2014 technology firms in the S&P 500 index will earn 9.3 percent higher income than in 2013, according to FactSet, which gathers Wall Street’s earnings estimates. While that figure is slightly below the 10.5% rise predicted for the index as a whole, it is much better than the tech industry’s revenues growth in 2013, which is expected to have been 1.9% after all financial reports are unveiled. In addition, net income has been rising faster than profits; it is expected to rise 5.5% as tech companies manage to squeeze even more profit out of each penny of sales. Corporate operating profit margins are predicted to reach an all-time high of 10% revenue in 2014. The average margin for the technology industry, which is consistently among the most profitable sectors in the United States, is expected to come between 15% and 16% this year.

The high expectations for 2014 tech revenue growth help explaining why the Nasdaq Composite index surged a startling 38% in last year, even better than the S&P 500’s 30% yearly gain. However, many on Wall Street think that tech shares still have even more room to run this year, as the predicted profit growth will maintain average price-to-earnings ratios approximately in-line with historical averages. Technology stocks had a forward price-to-earnings ratio of 15.5 during last week. While that is above the five-year average of 13.7, it is still below the 10-year average of 16.7. Still, all these numbers are based on Wall Street’s earnings estimates only, more accurate expectations will come after the tech firms reveal their full books.

When are the big numbers coming?

During these days, investors will start to hear full-year forecasts straight from technology firms’ executives revealing the tech industry’s revenues growth in 2013. Intel, the most successful chip-maker among the tech sector, is planning to disclose its full-year 2013 earnings report on January 16. Hardware giant IBM scheduled its report on January 21, online worldwide retailer eBay’s findings are expected on January 22, and the biggest software maker Microsoft will open its books on January 23.

While Intel, Microsoft, and IBM are big enough to move the broader stock market with their earning news, the most important tech trading actions are predicted to take place during the January’s last week, when big tech firms such as Apple (January 27), Yahoo (January 28), Qualcomm (January 29), Facebook (January 29), and Google (January 30) will be disclosing their numbers. Other remarkable tech firms such as Twitter, Hwelett-Packard, and Cisco Systems will unveil their figures on February.

As soon as the earnings season is over and all full-year 2013 earnings reports have been unveiled, investors will have a more concrete idea of whether Wall Street’s earnings estimates and share prices are justified.

Laura Gomez

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