Zacks Earnings Preview: Wal-Mart, Nordstrom, Abercrombie & Fitch, Prudential Financial and Express Scripts

Feb 25, 2013, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, Feb. 25, 2013 /PRNewswire/ -- releases the list of companies likely to issue earnings surprises. This week's list includes Wal-Mart (NYSE: WMT), Nordstrom (NYSE: JWN), Abercrombie & Fitch (NYSE: ANF), Prudential Financial (NYSE: PRU) and Express Scripts (Nasdaq: ESRX).


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Last Week of Earnings Season

The overall backdrop for the retail space has not been very favorable lately, as we saw in the Wal-Mart (NYSE: WMT) results, with the payroll tax changes, delayed tax refunds and higher gasoline prices impacting sales. This isn't a concern with the high end of the retail space, but Wal-Mart's soft outlook for this year is relevant to Target and other discounters. Guidance from Nordstrom (NYSE: JWN) andAbercrombie & Fitch (NYSE: ANF) was also less than reassuring. It will be interesting to see if those trends will show up in Macy's and Gap's results.

The reality of the Q4 earnings season is that it has turned out to be not as bad as many of us suspected. Leaving aside anemic earnings growth, on most other metrics the fourth quarter reporting season is quite good. Not only are the ratio and magnitude of surprises better than the previous quarter and comparable to the last many, but the tone of management guidance has also been less worrisome than was the case in the third quarter reporting season.

Total earnings for the 445 S&P 500 companies that have come out with Q4 results, as of Friday February 22, are up +2% from the same period last year, with 66.7% beating expectations with a strong median surprise of +3.4%. Stripping out the unusual revenue growth atPrudential Financial (NYSE: PRU) and Express Scripts (Nasdaq: ESRX), total revenues are up +1.2%, with 61.8% of the companies beating revenue expectations, with a median revenue surprise of +0.7%.

Expectations for the coming quarters have started coming down, but they still represent a meaningful improvement from what we saw in 2012. Total earnings are expected to be down -3.7% in the first quarter, up +3.9% in the second quarter, +7.1% in the third quarter and +13.5% in the fourth quarter of 2013.

For the full-years 2013 and 2014, total earnings are expected to be up +6.7% in 2013 and 11.8% in 2014. The bottom-up 'EPS' estimates for the S&P 500 currently stand at $109.38 for 2013 and $122.28 for 2014 (Note: The Zacks bottom-up estimates are lower than other data vendors because we account for employee stock options, while others don't).

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