CHICAGO, Dec. 19, 2014 /PRNewswire/ -- Zacks Director of Research Sheraz Mian says, "By the end of this week, we will have seen Q4 results from 15 S&P 500 members."
Handicapping Q4 Earnings Season
The December quarter hasn't ended yet, but the Q4 earnings season has gotten underway already. The reason for that is that we count companies with fiscal quarters ending in November as part of our Q4 tally. Using this definition, the AutoZone (NYSE:AZO-Free Report) release on December 9th was the first Q4 earnings report, with the tally thus far at 9 S&P 500 members. By the end of this week, we will have seen Q4 results from 15 S&P 500 members. That said, the reporting cycle wouldn't get heated up till around the middle of next month.
Estimates for Q4 have come down as the quarter has unfolded, with current expectations of +2.2% total earnings growth in the quarter down from +9.6% growth expected in late September. The chart below shows how estimates for the quarter have evolved over the past two and a half months.
Estimates for 14 out of 16 sectors have declined, though revisions for the Energy, Autos, Basic Materials, Industrial Products, and Finance are the most pronounced.
The revisions trend has been broadly negative across all sectors, with the magnitude of revisions for Q4 the highest we have seen in more than a year. This isn't reflective of a fresh deterioration in the earnings picture, the ongoing global growth worries notwithstanding. Energy has been the biggest drag on Q4 estimates.
The Zacks Consensus EPS estimates for Exxon (NYSE:XOM-Free Report), Chevron (NYSE:CVX-Free Report) and ConocoPhillips (NYSE:COP-Free Report) for the December quarter have fallen by -21.6%, -29.9% and -44.8% since the quarter started – no doubt the overall Q4 growth rate for the sector has flipped from a positive growth rate of +7% to a decline of -17.6% at present. The sector's growth picture isn't expected to improve anytime soon either.
The outlook for activity levels has been looking up on the home front, with business and consumer confidence expected to push economic growth into above-trend levels going forward. But the picture is a lot less reassuring beyond the U.S. borders, with recent data from Europe as well as China showing renewed loss of momentum in those regions.
Looking Ahead to Q4 Earnings
Companies with fiscal quarters ending in November have been coming out with quarterly results in recent days; these results will form part of our 2014 Q4 tally. As of this morning, we have such Q4 results from 9 S&P 500 members, with the tally reaching 15 by the end of the week. The December quarter earnings season wouldn't be in the spotlight at least through mid-January. But by then we will have results from more than two dozen S&P 500 members, including a number of industry leaders like FedEx, Oracle, and Nike already in the books.
As discussed earlier, estimates for Q4 fell as the quarter unfolded, a trend that has been in place for quite some time. Total earnings in Q4 are expected to be up +2.2% on 0.1% higher revenues and modestly higher margins.
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