The following excerpt is from this week's Earnings
Trends. To see the full report,
please click here
Q4 Earnings Estimates Coming Down
With results from almost 97% of the S&P 500 members already
out, the Q3 earnings season is effectively over. The focus lately
has been on results from Retail sector, not so much on how they
did in Q3, but how they see the outlook for the holiday season
) results appeared fairly encouraging on that front, but Macy's
doesn't speak for the entire sector.
) clearly is such a bellwether, but its results and outlook don't
inspire much confidence about what to expect from the sector as
whole in Q4. Results from others like
) confirm Wal-Mart's dour outlook.
Fewer shopping days this holiday season is not only prompting
retailers to open their doors even earlier on Thanksgiving Day
this year, but is likely making it a more promotional affair as
well. Overall, the retailers are beating top-line expectations at
a very low rate in Q3 relative to the last few quarters and we
should probably brace ourselves for negative bottom-line
surprises in Q4.
For the Q3 earnings season as a whole, total earnings for the 484
S&P 500 companies that have reported results already, as of
Thursday morning November 21st, are up +4.9% from the same period
last year, with 65.3% beating earnings expectations with a median
surprise of +2.53%. Total revenues for these companies are up
+3.0%, with 41.7% beating revenue expectations with a median
surprise of +0.12%.
The charts below show how the results from these 484 companies
compare to what these same companies reported in Q2 and the
average for the last 4 quarters. The earnings and revenue growth
rates, which looked weaker in the earlier phase of the Q3
reporting cycle, improved materially.
The earnings and revenue growth rates for the 86.4% of Retail
sector companies in the S&P 500 that have reported already
are modestly better than what we have seen from those same
companies in recent quarters. But the beat ratios, specifically
on the revenue side, remain very weak, with the sector's revenue
beat ratio the second worst of all 16 Zacks sectors in the
The chart below shows the sector's revenue surprises compare to
what we have seen in recent quarters. Please note that the chart
compares the revenue surprises for the 38 retailers in the
S&P 500 (out of 44 total) that have reported Q3 results
already with the performance of those same 38 companies in Q2 and
the 4-quarter average.
The composite earnings growth rate for Q3, combining the results
from the 484 that have come out with the 16 still to come,
currently remains at +4.9% on +3.0% higher revenues. This will be
the best earnings growth rate of 2013 thus far, though
expectations are for even stronger growth in Q4.
Estimates for Q4 have started coming down, though judging by the
) guidance, they likely still have plenty of room to go down. The
chart below shows the evolution of Q4 growth rate over the last
The picture emerging from the chart above would hardly be the
first time estimates would be coming down like this - we have
been seeing this play out quarter after quarter for more than a
year now. The market hasn't cared much about this uninspiring
earnings picture thus far, likely a reflection of the
ever-supportive Fed. And with most market participants expecting
the Fed to hold off on making any changes to its policy stance
till at least through April 2014, they may see no reason to worry
about negative estimate revisions for Q4.
- Total earnings for the 484 S&P 500 companies that have
reported results already are up +4.9%, with 65.3% beating
earnings expectations. Revenues for these companies are up
+3.0%, with a revenue 'beat ratio' of 41.7%.
- Unlike Q2, the Finance sector has been less of a growth
driver in Q3, with total earnings for the sector up +9.9%.
Bank of America
), the sector's Q3 earnings growth drops to +3.3%. The sector's
growth momentum has decelerated from the last few quarters,
with industry leaders
- Technology spotlights the ex-Finance variance from Q2, with
total earnings for the 94.0% of the sector's total market
capitalization that have reported up +6.0% on +3.7% higher
revenues. The +6.0% earnings growth for the 63 Tech companies
that have reported compare to -8.8% earnings decline in Q2 and
the 4-quarter average of -1.7% for the same group of
- Total Q3 earnings for all S&P 500 companies, combing
the 484 that have reported with the 16 still to come, are
expected to be up +4.9%, which reflects +3.0% revenue growth
and modest gains in margins. This compares to +3.8% earnings
growth in Q2.
- Guidance remains negative, prompting estimate cuts for Q4,
though there likely still plenty of downside to current +6.7%
growth expected in Q4. While there is not much growth, the
overall level of total earnings is quite high, with total
earnings in Q3 on track to reach a new all-time quarterly
record at $261.7 billion, surpassing Q2's record of $258.5
- Total earnings for the S&P 500 are expected to be up
+6.2% in 2013 and +11.0% in 2014.
To see the Full Earnings Trends PDF,
APPLE INC (AAPL): Free Stock Analysis Report
BANK OF AMER CP (BAC): Free Stock Analysis
DOLLAR TREE INC (DLTR): Free Stock Analysis
GOOGLE INC-CL A (GOOG): Free Stock Analysis
MACYS INC (M): Free Stock Analysis Report
SEARS HLDG CP (SHLD): Free Stock Analysis
TARGET CORP (TGT): Free Stock Analysis Report
WAL-MART STORES (WMT): Free Stock Analysis
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