2014

Zacks Earnings Trends Highlights: Oracle, FedEx, Nike, Bank of America and Chubb

CHICAGO, Jan. 9, 2014 /PRNewswire/ -- Zacks Director of Research Sheraz Mian says, "The real Q4 earnings story is not about the 18 companies that have reported already, but the remaining 482 companies."

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Q4 Earnings Season Gets Underway

We are still a couple of weeks away from getting into the heart of 2013 Q4 earnings season. But the reporting cycle has gotten underway, with results from 18 S&P 500 companies out already. Even though these early reports from companies with fiscal quarters ending in November include a few industry leaders like Oracle (NYSE: ORCL-Free Report), FedEx (NYSE: FDX-Free Report) and Nike (NYSE: NKE-Free Report), we can't draw any firm conclusions from what we have seen thus far.

 

The real Q4 earnings story is not about the 18 companies that have reported already, but the remaining 482 companies. And as we have been seeing repeatedly over the past year or so, estimates have come down sharply as the quarter unfolded. The current expected Q4 total earnings growth for the S&P 500 of +6.3% is down quite a bit over the last three months. 

The actual earnings growth rate in Q4 will most certainly be higher than the +6.3% expected at this stage, a function of management's highly refined expectations management game (more on that a little later). But even this growth rate will be the highest quarterly growth pace of 2013. 

The chart above is a picture of accelerating growth. But looks could be deceiving, as the stronger-looking Q4 growth pace is primarily a function of easy comparisons, particularly for the Finance sector. Bank of America (NYSE: BAC-Free Report) has a roughly $2 billion positive swing in its total earnings and many insurers like Chubb (NYSE: CB-Free Report), among others don't have to deal with the type of catastrophic losses they suffered in the 2012 East Coast storms. Outside of Finance, total earnings growth for the S&P 500 drops to +3.5%.

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