Zacks Earnings Trends Highlights: Wal-Mart, Whole Foods, Deere and Boeing
CHICAGO, Feb. 21, 2014 /PRNewswire/ -- Zacks Director of Research Sheraz Mian says, "Part of the guidance weakness is likely a function of management's need for controlling expectations."
Earnings Guidance Remains Weak
Our overall verdict on the Q4 earnings season is that it is no better or worse than what we have been seeing in the last few quarters. In some respects, the Q4 earnings season is an improvement over the recent past. Specifically, total earnings for the S&P 500 are on track to reach a new all-time quarterly record and even earnings growth for the quarter is in on track to be the highest of the year (even after accounting for easy comparisons). Positive surprises started off on the weak side, but even those are running at the best pace of the year.
Revenue growth has been a challenge for companies for quite some time and we don't see any improvement on that front in Q4 either. If anything, the aggregate revenue growth rate at this stage is even weaker than what we have been seeing in recent quarters, though the bulk of the revenue weakness is due the Finance and Energy sectors.
The most notable thing that hasn't changed at all from other recent quarters is guidance – it was weak before and it's still weak, as the guidance from Wal-Mart (NYSE: WMT-Free Report), Whole Foods (Nasdaq: WFM-Free Report), Deere & Company (NYSE: DE-Free Report) and Boeing (NYSE: BA-Free Report), just to name a few, shows. Part of the guidance weakness is likely a function of management's need for expectations management. The need for conservatism aside, one has to be extremely cynical to believe that management teams would guide lower while knowing that their business outlook was stable, if not improving. The chart below shows how estimates for the current quarter have fallen in response to weak company guidance.
With the Retail sector heavily represented in the still-to-come reports, it is reasonable to expect that estimates still have room to go down.
Companies have been guiding lower quarter after quarter, prompting earnings estimates to keep coming down for almost two years. The market didn't care much about this, with an ever helpful Fed not letting earnings-related worries coming in the way of the market's upward thrust. But the Fed has started getting out of the QE business just as these other issues have taken center stage.
The popular narrative connects the Fed Taper with what is happening in the emerging markets. The Fed doesn't appear in any mood, for obvious reasons, to adjust its Taper plans to accommodate the emerging economies. In fact, it is reasonable to assume that they don't mind the safe-haven trade keeping bond yields in check.
Want stock picks from Zacks Equity Research that are based on earnings estimates? Subscribe to the free "Profit from the Pros" newsletter: Click here
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term. Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Click here to subscribe to this free newsletter today.
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros.
Follow us on Twitter: http://twitter.com/zacksresearch
Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
SOURCE Zacks Investment Research, Inc.