Zacks Earnings Preview: Oracle, FedEx, Alcoa, J.P. Morgan and Wells Fargo
CHICAGO, April 8, 2013 /PRNewswire/ -- Zacks.com releases the list of companies likely to issue earnings surprises. This week's list includes Oracle (Nasdaq: ORCL), FedEx (NYSE: FDX), Alcoa (NYSE: AA), J.P. Morgan (NYSE: JPM) and Wells Fargo (NYSE: WFC).
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Econ Data Turns Market Bearish
The market's mood appears to have shifted following the recent run of weak economic data, with investors grudgingly acknowledging that the economy may not be in as good a shape as everybody had expected. May be it's the typical seasonal weakness that we have become accustomed to in recent years, or maybe it's the delayed impact of the budget sequester and other tax law changes. It will take the market some time to figure that one out, but we have the 2013 Q1 earnings season to keep us busy.
The Q1 earnings season has started already, with reports from 22 S&P 500 companies already out. It has been a mixed bag thus far, with a few notable misses from the likes of Oracle (Nasdaq: ORCL) and FedEx (NYSE: FDX). But this is still quite early in the season, and we wouldn't get a good flavor of this reporting cycle for another two to three weeks.
This week brings in earnings reports from 34 companies, including 9 S&P 500 members. We will get Alcoa's (NYSE: AA) report after the close on Monday, but will have to wait till Friday morning to get the week's key reports from J.P. Morgan (NYSE: JPM) and Wells Fargo (NYSE: WFC).
In terms of earnings growth, the banks are facing tough comparisons, as results in the first quarter of 2012 were very strong. The challenge for the group is to balance the net interest margin pressures and muted loan growth with continued momentum on the mortgage side and a healthy enough capital markets business. Wells Fargo and J.P. Morgan are both among the better-placed of their peers; many others are not so well positioned.
We will have to wait another week to get a good sense of banking sector results, but expectations are for total Finance sector earnings to decline by -3.8%, which would come after the sector's +10.3% +23.3% earnings growth in the preceding two quarters, respectively. Tough comparisons are a major culprit here -- the first quarter of 2012 was the strongest quarter for the sector since 2009.
Total earnings for companies in the S&P 500 are expected to be down -2.6% from the same period last year, which reflects -2.4% decline in revenues and essentially flat margins. Tough comparisons account for the bulk of the weak growth outlook for the first quarter – the first quarter of 2012 still remains the highest point for quarterly earnings since the start of this earnings cycle in 2009. Total earnings were up +2% in the fourth quarter.
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