3 Early Stock Winners From Q3 Earnings Season

Stocks to buy

Third quarter earnings season has gotten underway and we have already seen the good, the bad and the ugly from corporate America. While it’s still early days, clear winners and losers have emerged with their Q3 prints. FactSet reports that, with only 17% of companies in the benchmark S&P 500 index having reported their Q3 financial results, 73% have beaten analysts’ expectations for their earnings, or profits, while 66% of companies have reported better-than-expected revenues. Those numbers are a little lower than normal, but still very positive. So far, we have had earnings releases from all the major U.S. banks and airlines, and a smattering of technology companies. Over the next week, we’ll see Q3 results from most of the mega-cap technology companies, whose fortunes can sway the entire market. Here are three early stock winners from Q3 earnings season.

Netflix (NFLX)

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We’ll start with the hands down winner so far in Q3 earnings season, streaming giant Netflix (NASDAQ:NFLX). The stock rose 16% immediately after the company reported Q3 results that trounced Wall Street forecasts. The headline number was that Netflix added 8.8 million net new subscribers during the July through September quarter, which was much better than the 6.1 million expected by analysts who track the company’s progress.

For Q3, Netflix reported earnings per share (EPS) of $3.73, which was ahead of the consensus estimate among analysts of $3.49. Revenue for the three months ended Sept. 30 amounted to $8.54 billion, which matched forecasts. The strong results come despite an ongoing strike by Hollywood actors that has shutdown film and television production. Netflix said the positive quarter was due to increased subscription fees and profitability. The company now expects a profit margin of 20% for all of 2023, which is at the high end of its previous target.

Later this month, Netflix will raise the monthly price of its premium subscription plan in America to $22.99 from $19.99, while its basic plan will rise to $11.99 from $9.99 currently. Prices for the ad-supported and standard plans will remain the same. NFLX stock has now increased 44% in the last 12 months.

JPMorgan Chase (JPM)

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JPMorgan Chase (NYSE:JPM), the world’s largest bank with more than $3 trillion of assets under management, issued a very strong Q3 print that beat Wall Street forecasts across the board. The lender announced EPS of $4.33, which was greater than the $3.95 consensus estimate among analysts who cover the bank. Revenue in Q3 totaled $40.69 billion, which was also above the $39.63 billion expected among Wall Street analysts.

The lender attributed its strong Q3 results to greater interest income and lower credit costs. JPMorgan Chase’s latest financial results were also helped by its acquisition earlier this year of distressed regional lender First Republic Bank. Profit at JPMorgan rose 35% during Q3 from a year ago, but would have been up only 24% had First Republic been excluded from the results. JPMorgan Chase said it continues to set aside more money to cover potential loan losses. JPM stock has increased 24% over the last 12 months.

AT&T (T)

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One of the pleasant surprises of Q3 earnings season so far has been telecommunications firm AT&T (NYSE:T). The company reported Q3 financial results that beat estimates and raised its target for free cash flow for the remainder of this year. Specifically, AT&T reported EPS of 64 cents, which edged forecasts of 62 cents. Revenue in Q3 increased 1% from a year earlier to $30.40 billion. Analysts had penciled in revenue of $30.20 billion for the quarter.

In terms of forward guidance, AT&T said it now expects free cash flow of $16.5 billion. Previous guidance called for free cash flow of $16 billion. The company also said that its broadband revenue should grow 7% or better this year. Net additions of wireless postpaid phone subscribers in Q3 totaled 468,000, and net adds for consumer wireline fiber optic service amounted to 296,000. Both numbers bested Wall Street forecasts. T stock is down 8% over the last 12 months, though it has gained 7% since the company issued its Q3 results.

On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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