FedEx, Oracle, Nike, Accenture and Lennar are part of Zacks Earnings Preview
CHICAGO, Sept. 23, 2013 /PRNewswire/ -- Zacks.com releases the list of companies likely to issue earnings surprises. This week's list includes FedEx (NYSE:FDX-Free Report), Oracle (NYSE:ORCL-Free Report),Nike (NYSE:NKE-Free Report), Accenture (NYSE:ACN-Free Report) and Lennar (NYSE:LEN-Free Report)
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Early Trickle of Q3 Earnings Reports
The Fed's Taper decision may have been delayed a bit, but the 2013 Q3 earnings season has gotten underway, with 7 S&P 500 companies already reporting results. It's hard to draw any conclusions from this small sample size, but a number of the reports have been industry leaders like FedEx (NYSE:FDX-Free Report) and Oracle (NYSE:ORCL-Free Report).
The FedEx results were strong. But the company's global economic bellwether status notwithstanding, the outperformance was more a function of company-specific initiatives and less due to momentum in the global economy.
We are still about three weeks away from the Q3 reporting cycle really ramping up, but we will continue to get a steady supply of earnings before then. This week brings earnings reports from 27 companies, including 10 S&P 500 members.
Nike (NYSE: NKE - Free Report), Accenture (NYSE: ACN - Free Report) and Lennar (NYSE: LEN - Free Report) are some of the notable companies reporting results this week.
As has been the case at the start of recent quarterly earnings cycles, expectations for the Q3 earnings season have fallen sharply over the last three months. Total earnings for companies in the S&P 500 are now expected to be up only +1.2% from the same period last year, down from +1.3% last week and +5.1% at the start of the quarter in early July, as the chart below shows.
This negative revisions behavior is hardly unusual as we have been repeatedly seeing this pattern play out in recent quarters. Companies have been overwhelmingly guiding lower, prompting analysts to cut estimates for the following quarter. The revisions behavior ahead of the Q2 earnings season was no different and most of the same sectors have experienced negative revisions this time around as well.
The 'regulars' on the negative estimate revisions beat include Technology, Basic Materials and Industrials. But Retail and Consumer Discretionary have played material roles in bringing down expectations for Q3.
Estimates for other sectors have come down as well, with even the Finance sector earnings expected to be up +6.4% now vs. the +8.1% that was expected in early July. Energy, Utilities, Conglomerates and even Construction have suffered negative revisions in varying degrees.
Part of the extremely strong growth expected in Q4 is a function of easier comparisons, as 2012 Q4 represents the lowest quarterly earnings total for the S&P 500 in the last six quarters, with the comps particularly easy for the Finance sector. But it's not all due to easy comparisons, as the expected earnings totals for Q4 represent a new all-time quarterly record.
Total earnings for the S&P 500 reached a new record at $256.7 billion in Q2, surpassing Q1's $253.8 billion record. But they are expected to reach $273.8 billion in 2013 Q4, with total earnings growth outside of Finance expected at +8.6%.
Judging by what has happened over the past year or so, these Q4 estimates will come down as companies shares their outlooks on the Q3 earnings calls. The market didn't care much as estimates came down in the last few quarters, hoping for better times ahead. Will it do the same this time as well, pushing its hopes of earnings ramp up into 2014? We will find out the answer to that question over the next two months.
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Since 1988, the Zacks Rank has proven that "Earnings estimate revisions are the most powerful force impacting stock prices." Since inception in 1988, #1 Rank stocks have generated an average annual return of +28%. During the 2000-2002 bear market, Zacks #1 Rank stocks gained +43.8%, while the S&P 500 tumbled -37.6%. Also note that the Zacks Rank system has just as many Strong Sell recommendations (Rank #5) as Strong Buy recommendations (Rank #1). Since 1988, Zacks Rank #5 stocks have significantly underperformed the S&P 500 (+3% versus +10%). Thus, the Zacks Rank system allows investors to truly manage portfolio trading effectively.
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