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Bank of America and Apple are part of Zacks Earnings Preview:

For Immediate Release

Chicago, IL - October 19, 2015 - Zacks.com releases the list of companies likely to issue earnings surprises. This week's list includes Bank of America ( BAC ) and Apple ( AAPL ) .

To see more earnings analysis, visit http://at.zacks.com/?id=3207 .

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The Q3 earnings season ramps up in a big way this week, with 436 companies reporting quarterly results, including 114 S&P 500 members. With results from 58 index members already out, we will have seen Q3 results from one-third of the S&P 500 members by the end of this week.

The Finance sector has a heavy presence in the reports thus far and the sector's earnings performance is lackluster at best. We knew the operating environment was tough for banks in the quarter, with modest gains in core loan portfolios offset by soft capital markets activities in a backdrop of persistently compressed net interest margins as a result of Fed policy. As a result, bank revenues are down, with bottom-line growth primarily coming from cost cuts and fewer litigation expenses.

As of Friday, October 16th, we have seen Q3 results from 15 of the 85 Finance sector companies in the S&P 500, but these 15 companies account for 39.3% of the sector's total market cap in the index. Total earnings for these 15 Finance sector companies are up +18% on -2.6% lower revenues, with 66.7% beating EPS estimates and 33.3% coming ahead of revenue estimates.

The results thus far are weaker relative to other recent periods on all counts, except for earnings growth that is tracking notably better relative to both Q2 as well as the 4-quarter average. The revenue picture is particularly notable for its weakness, both in terms of growth rate as well as surprises. The earnings growth comparison is misleading as the Q3 growth is primarily a result of easy comparisons at Bank of America ( BAC ).

The revenue weakness isn't confined to the Finance sector - the issue is present in all the other sectors as well, which will likely become very obvious on this week's busy docket.

Q3 Scorecard ( as of Friday, October 16th )

With Q3 results from 58 S&P 500 members already on the books, total earnings are up +3.9% on +0.1% higher revenues, with 69.0% beating EPS estimates and 41.4% coming ahead of top-line expectations.

Any way you look at it, this is weak performance relative to the recent past, with revenue surprise particularly standing out for their weakness. Please note that the +3.9% earnings growth for the index at this stage gets a lot of help from the easy comparisons at Bank of America referred to earlier. Excluding Bank of America, the earnings growth picture is a lot weaker.

These numbers will move around as we get into the heart of the earnings season this week and beyond. But what all of this shows is that the top-line weakness, which was a big issue in the Q2 earnings season, doesn't appear to be changing this time around either.

Q3 Estimates As a Whole

Combining the actual results from the 58 S&P 500 members that have reported results with estimates for the still-to-come reports, total earnings for the index are expected to be down -4.5% from the same period last year on -4.8% 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 -64.5% year over year), total earnings for the index would be up +2.8% on +0.2% higher revenues.

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, half of the 16 Zacks sectors are expected to have lower earnings in 2015 Q3 relative to the year-earlier period, with Basic Materials (-24.3%), Industrial Products (earnings decline of -23.9%), and Conglomerates (-7.3%) as the big decliners.

On the positive side, the Finance sector is expected to have positive growth. But that's largely thanks to easy comparisons at Bank of America, as indicated earlier. Other sectors with positive earnings growth in Q3 include Autos (+19.8%) Transportation (earnings growth of +19.1%), Medical (+8.6%), and Construction (+7.4%). Total earnings for the Technology sector are expected to be up +2.3% from the same period last year, but the sector's growth rate drops into negative territory once Apple's ( AAPL ) strong contribution is excluded from the numbers.

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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.

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