by Ian Harvey
Introduction to Option Trade of the Week
While markets are at record highs, March-quarter earnings of S&P 500 companies are expected to dip 1.3 percent, with revenues dropping 3.5 percent as the dollar hurts U.S. multinationals. The equity market is looking forward to oil being less of a drag going forward and also that earnings in the second half will be better than they are now.
There are now 27 Tech sector companies in the S&P 500 (out of 62 total in the index) that have presented results for the First Quarter, that combined account for 59.1% of the sector’s total market cap in index. Total earnings for these 27 Tech companies are down -2.7% from the same period last year on +1.7% higher revenues, with positive surprises running at a below-average 46.4% for earnings and a decent-enough 50% for revenues.
However, there is certainly some positive action emerging, as could be seen last week, with the market’s positive reception to otherwise mediocre reports from Intel, IBM, Google, Microsoft Amazon and others.
It is important to note that the Computer & Office Equipment industry is the largest earnings contributor to the sector, bringing in roughly 45% of its total earnings last year. The composite (or blended) growth rate for the Tech sector, combining the actual results from the 27 sector companies that have reported with estimates for the still-to-come 36 players, is for total earnings growth of +4% on +4.4% higher revenues.
There is one thing for sure – some of these tech companies are in the positive spotlight. There is one company that shines above all, which is cheaper than the average stock in the S&P 500, continues to maintain its beautiful balance sheet, keeps its dividend and continually comes up with creative new ideas and products.
PLEASE NOTE: This option trade is now no longer available.