Google and Facebook are part of Zacks Earnings Preview:

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Feb 03, 2014, 09:30 ET

CHICAGO, Feb. 3, 2014 /PRNewswire/ -- Zacks.com releases the list of companies likely to issue earnings surprises. This week's list includes Google (Nasdaq:GOOG-Free Report) and Facebook (Nasdaq:FB-Free Report).

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Halftime Report for Q4 Earnings Season

The 'composite' picture for Q4, where we combine results from the 251 companies that have reported already with the 249 still to come, is for growth rate of +9.6%. This will be the highest quarterly growth pace of 2013, with easy comparisons playing a non-trivial role in propping up the growth pace. The +9.6% growth rate compares to +5.1% in Q3 and +4% in Q2.

Finance remains a big growth driver in Q4 – total earnings growth for the S&P 500 in Q4 drop to +6.5% once the sector is excluded. Energy continues to be a drag on aggregate growth, with total earnings for the sector expected to be down -8.9% in Q4 after declining -8.4% in Q3. Excluding the Energy sector, total Q4 earnings for the S&P 500 would be up +12.3% vs. +7.1% in Q3.

Technology earnings are expected be up +6.0% after the +5.9% gain in Q3. While Google (Nasdaq:GOOG-Free Report) and Facebook (Nasdaq:FB-Free Report) did extremely well, the sector overall has had a fairly good earnings season as well. With Q4 results from 84.5% of the sector's total market capitalization already out, total earnings for the sector are up +6.5% on +5.6% higher revenues. These growth rates aren't materially different from what we saw from this same group of companies in Q3, but the beat ratios represent a notable improvement.

Of the Tech sector companies that have reported already (45 out of 65 Tech sector companies in the S&P 500 accounting for 84.5% of the sector's total market cap have reported results), 84.4% have beat earnings expectations, up from Q3's 68.9% earnings beat ratio and the 4-quarter average of 74.4%. Positive revenue surprises have been materially widespread relative to recent quarters as well, with Q4 revenue beat ratio currently tracking 73.3% vs. 57.8% in Q3 and the 4-quarter average of 55.6%.

Lack of corporate capital spending has been an issue for the sector for some time and the consensus view is that we will see a turnaround on that front later this year. We haven't heard anything yet that will add to our confidence in that expectation. But this optimistic view is a big contributor to the expected upturn in the Tech sector's growth estimate later this year. Total earnings for the sector are expected to be up +9.5% this year and +10.4% in 2015, pronounced acceleration from the flat reading in 2013.

Guidance Still on the Weak Side

For obvious reasons, the market's focus has been on management guidance for 2014. Companies typically provide guidance only for the following quarter, but they do tend to discuss their outlook for the coming year on the Q4 earnings calls.

While about half of the results are still to come, what we have seen thus far on the guidance front doesn't show any improvement from what we have been seeing quarter after quarter for almost two years now. Despite the improving domestic economic backdrop and the stabilized European environment, companies are still predominantly guiding lower. The ongoing emerging market turmoil is only adding to this lack of visibility. We have seen this start to show up in negative estimate revisions for Q1 and beyond, as earlier referred to. But estimates will likely have come down more if current trends persist.

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