Wal-Mart, AIG, Herbalife and Sprint are part of Zacks Earnings Preview
CHICAGO, Nov. 3, 2014 /PRNewswire/ -- Zacks.com releases the list of companies likely to issue earnings surprises. This week's list includes Wal-Mart (NYSE:WMT-Free Report), AIG (NYSE:AIG-Free Report), Herbalife (NYSE:HLF-Free Report) and Sprint (NYSE:S-Free Report).
To see more earnings analysis, visit http://at.zacks.com/?id=3207.
Every day, Zacks.com makes their Bull Stock of the Day available, free of charge. To see it, click here.
Average Grade for Q3 Earnings Season
We still have plenty of Q3 earnings reports to come, but the bulk of the earnings season is now behind us, with results from 363 S&P 500 companies already out as of Friday, October 31st. The Retail sector is the only one where more than half of the sector's companies have yet to report Q3 results. For the remaining sectors, the reporting season has ended for 2 – Autos and Aerospace – whole 4 other sectors have Q3 results for 90% or more of their total market caps.
More than a 1000 companies will be reporting results this week, including 87 S&P 500 members. By the end of this week, we will have Q3 earnings reports from 450 S&P 500 companies, with the Retail sector as the only one that will have any sizable number of reports still awaited at that stage.
We grade this earnings season as about 'average' – it isn't good, but it isn't bad either. To explain our 'average' grade, we share two types of charts below that will show how the results thus far compare with the past and what's happening to estimates for the current period (2014 Q4).
As you can see, it's hard to make one all-encompassing narrative for the reporting cycle, other than to say that it's not materially different from what we have been seeing from these companies in other recent quarters, particularly on the growth front. Beat ratios appear to be diverging from the norm a bit – with the Q3 earnings beat ratios modestly tracking above recent levels while revenue beat rates are on the weak side.
One could argue that this isn't bad performance and we are being harsh in giving this reporting cycle an 'average' grade. That's a fair comment, but our grade also reflects how the results thus far, particularly management guidance, are impacting estimates for the current period (2014 Q4).
This negative revisions trend isn't new either – we have been seeing this quarter after quarter for more than two years now. In some respects, the pace and magnitude of negative revisions at this stage is exceeding what we had been seeing at comparable stages in the last few quarters.
The Q3 Scorecard (as of October 31st)
We have seen Q3 results from 363 S&P 500 members that combined account for 79.2% of the index's total market capitalization. Total earnings for these companies are up +7.2% from the same period last year, with 72.5% of the companies beating earnings estimates. Total revenues are up +3.9% and 52.1% have come ahead of top-line estimates.
The earnings growth rate for 9 of the 16 Zacks sectors is in double digits, with Basic Materials (up +22.9%), Utilities (+14.9%), and Medical (+14.2%) having the strongest growth rates. The Materials strength is a reflection of increased demand for this economically sensitive sector in these troubled times, but relatively easier comparisons for the Chemicals (the largest industry in the sector) and Steel industries.
On the flip side, we have just a couple of negative signs on the growth front, with Autos down -21.6% and Retail down -1.3%. We know that the automakers were struggling with product recalls and the Retail sector still has plenty of reports to come. The hope is that the falling gasoline prices will help the sector this holiday season, though recent commentary from Wal-Mart (NYSE:WMT-Free Report) doesn't bear that out.
Mixed Tech Results
The Tech sector where we have seen results from 81.4% of the sector's market cap has been a relative laggard. Total earnings for the 44 Tech sector companies (out of 65 in the S&P 500 index) are up +6.0% on +9.1% higher revenues, with 72.7% beating EPS estimates and 61.4% coming ahead of top-line estimates. The beat ratios for the sector were tracking below historical levels earlier in the reporting cycle, but are now tracking above recent historical levels on the earnings front and a bit below on the revenue side.
The earnings growth rate is notably weaker than what we have seen from the cohort of 44 companies in other recent quarters, though the revenue growth rate is better.
The Composite Picture
Total earnings are expected to be up +5.9% from the same period last year on +3.2% higher revenues and modest margin gains. The expected growth rate for Q3 has been steadily improving in recent days as companies report results and beat estimates.
Total earnings for the S&P 500 reached an all-time quarterly record in 2014 Q2 and current estimates for Q3 put the quarterly total as the second highest ever. But given the historical trend of roughly two-thirds of the companies beating earnings estimates, the final Q3 tally will likely be right in the preceding quarter's record vicinity.
As mentioned earlier, estimates have been coming down lately and the revisions trend will likely accelerate as more consumer centric companies report in the coming days.
Note: Want more articles from this author? Scroll up to the top of this article and click the FOLLOW AUTHOR button to get an email each time a new article is published.
Note: For a complete analysis of 2014 Q3 estimates, please check out weekly Earnings Trends report.
Monday-11/03
- The October manufacturing ISM report will be the highlight today, with expectations of a modest pullback from September's 56.6 level.
- On a busy earnings day, we will have AIG (NYSE:AIG-Free Report), Herbalife (NYSE:HLF-Free Report) and Sprint (NYSE:S-Free Report) report results after the close.
- Earnings ESP or Expected Surprise Prediction, our proprietary leading indicator of positive earnings surprises, is showing AIG beating EPS estimates.
- Our research shows that companies with positive Earnings ESP and Zacks Rank of 1, 2 or 3 are highly likely to beat earnings estimates. AIG has Zacks Rank #2 (Buy)
Zacks "Profit from the Pros" e-mail newsletter offers continuous coverage of the industries and the stocks poised to outperform the market. Click to subscribe to this free newsletter today.
About Zacks
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.
Get the full Report on WMT - FREE
Get the full Report on AIG - FREE
Get the full Report on HLF - FREE
Get the full Report on S - FREE
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.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
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.
Logo - http://photos.prnewswire.com/prnh/20101027/ZIRLOGO
SOURCE Zacks Investment Research, Inc.
Share this article