Markets
FDX

Alcoa, Nike, FedEx and Bank of America are part of Zacks Earnings Preview:

A generic image of a pen and on top of a chart.
Credit: Shutterstock photo

For Immediate Release

Chicago, IL - September 28, 2015 - Zacks.com releases the list of companies likely to issue earnings surprises. This week's list includes Alcoa ( AA ), Nike ( NKE ), FedEx ( FDX ) and Bank of America ( BAC ).

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 .

What Will This Earnings Season Bring?

As of late, the market has been preoccupied with, global growth worries, and the Fed. But these macro issues will likely take a bit of back seat in the coming days as the Q3 earnings season takes the spotlight.

Investors tend to start paying attention to the earnings season when Alcoa ( AA ) reports, which will come out October 8th. But the earnings season has gotten underway, with results from 15 S&P 500 members already out. These early reporters include such industry leaders as Nike ( NKE ), FedEx ( FDX ) and others - all of them have fiscal quarters ending in August, which we count as part of our 2015 Q3 tally. We have more reports on deck this week, with a total 20 companies reporting results, including 4 S&P 500 members.

Will the Earnings Growth Picture Improve?

We know that the growth picture was quite bad in Q2, with total earnings for the S&P 500 index down -2.2% from the same period last year on -3.5% lower revenues. The Energy sector was the primary reason for the aggregate decline - the growth picture improves once the Energy sector is excluded from the aggregate numbers. Excluding Energy, total earnings for the S&P 500 index would have been up +5.1% in Q2 on +1.2% higher revenues.

The growth picture isn't expected to improve in Q3, with total earnings for the S&P 500 index expected to be down -5.9% from the same period last year on -3.9% lower revenues. The headwinds from Q2 are at play in Q3 as well, with a combination of Energy sector weakness, dollar strength and global growth uncertainties weighing on the outlook. Excluding the drag from the Energy sector (Energy sector earnings expected to be down -65.3% year over year), total earnings for the index would be up +1.4% on +1.4% higher revenues.

Estimates for the quarter came down over the last couple of months, following a trend that has now been well entrenched for quite some time. The chart below shows the evolution of Q3 earnings growth estimates since the start of the period in early July.

Please note that while the revisions trend has been negative and along the lines of what we are used to seeing in the recent past, the magnitude of revisions has been less than what we experienced in the comparable periods in other recent quarters. In other words, estimates for Q3 are down, but they aren't down as much as was the case in the last few quarters.

Stand-out Sectors in Q3

Energy stands out for the wrong reasons, as briefly mentioned earlier, but it is hardly the only one with negative earnings growth in Q3. In fact, 9 of the 16 Zacks sectors are expected to have lower earnings in 2015 Q3 relative to the year-earlier period, with Industrial Products (earnings decline of -24.8%), Conglomerates (-15.6%), Basic Materials (-13.8%), and Consumer Discretionary (-13.0%) as the big decliners.

On the positive side, the Finance sector is expected to have another good quarter, with total earnings for the sector expected to be up +8.3% after the +7.2% gain in the preceding quarter. A big part of the Finance sector gains this quarter are due to easy comparisons at Bank of America ( BAC ). Other sectors with positive earnings growth in Q3 include Transportation (earnings growth of +17.3%), Autos (+21.2%), Construction (+8.3%) and Medical (+8.0%).

Looking Beyond Q3

This year has effectively been washed out, with growth expected to resume early next year and accelerate from there onwards. Total earnings for the S&P 500 index are effectively flat this year, but are expected to be up in double-digits next year.

Economists define two back-to-back quarters of negative GDP growth as a recession. If the Q3 earnings growth rate stays in the negative territory as currently projected, then we will be well within out rights to call it an earnings recession. Analysts expect the earnings growth picture to start turning around next year and really accelerate towards the back-half of 2016.

The relatively optimistic looking expectations for the outer periods aren't unusual - Wall Street analysts always tend to be more optimistic about the future. But estimates start coming down as the period in question comes closer. The erosion of 2015 growth estimates was driven largely by what happened to the Energy sector. But estimates for other sectors came down as well……………and we will likely see something similar to current 2016 estimates as well.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today . Find out What is happening in the stock market today on zacks.com.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

ALCOA INC (AA): Free Stock Analysis Report

NIKE INC-B (NKE): Free Stock Analysis Report

FEDEX CORP (FDX): Free Stock Analysis Report

BANK OF AMER CP (BAC): Free Stock Analysis Report

To read this article on Zacks.com click here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

FDX AA BAC NKE

Other Topics

Earnings

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More