Cisco, Deere, Pepsi and AIG are part of Zacks Earnings Preview

For Immediate Release

Chicago, IL - February 13, 2017 - releases the list of companies likely to issue earnings surprises. This week's list includes Cisco (NASDAQ: CSCO - Free Report ), Deere & Co. (NYSE: DE - Free Report ), Pepsi (NYSE: PEP - Free Report ) and AIG (NYSE: AIG - Free Report ).

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Plenty of Positive Earnings News

The bulk of the Q4 earnings season is now behind us, with results from 358 S&P 500 members, or 71.6% of the index's total membership, already out. With another 53 index members on deck to report results next week, we will have seen results from more than 80% of the index's members by then.

This earnings season has turned out to be good one. Not only is growth on track to be the highest in two years, but total earnings for the quarter are also on track to be a new quarterly record.

Please recall that earnings growth turned positive only in 2016 Q3, having declined in each of the preceding 5 quarters.

Importantly, the positive Q4 growth isn't a result of easy comparisons, but actually a function of strong gains in actual earnings. In fact, the overall tally of Q4 earnings for the S&P 500 index is on track to reach an all-time record for the index, surpassing the previous record achieved in 2014 Q4.

One other positive for this earnings season is the relatively modest negative revisions to current-quarter (2017 Q1) estimates; they have come down, but not by as much as has historically been the case.

Q4 Scorecard ( as of February 10, 2017 )

We now have Q4 results from 358 S&P 500 members, or 71.6% of the index's total membership. With 53 index members on deck to report results next week, we will have seen Q4 results from 80.2% of the index's total membership by the end of next week. The notable reports this week include Cisco (NASDAQ: CSCO - Free Report ), Deere & Co. (NYSE: DE - Free Report ), Pepsi (NYSE: PEP - Free Report ), AIG (NYSE: AIG - Free Report ) and others.

Total earnings for these 358 index members are up +6.1% on +4.6% higher revenues, with 69% beating EPS estimates and 54.7% coming ahead of top-line expectations.

The Q4 growth pace is notably tracking above what we had seen from the same group of 358 index members in other recent periods. But positive surprises (right-hand chart above) are tracking on the low side relative to historical periods, particularly on the earnings front. The 69% proportion of Q4 companies beating EPS estimates compares to 75.1% in the preceding quarter, 74.1% as the 4-quarter average and 72.4% as the 12-quarter average. Positive revenue surprises are tracking below what we had seen from the same group of companies in Q3, but are roughly in-line with historical periods.

Standout Sectors

Sectors with strong growth and better than expected results (earnings & revenues) include the Finance, Construction, Technology, Utilities, And Business Services. Positive surprises for all of these sectors are tracking above the index level.

Finance : With results from 79.9% of the sector's market cap in the S&P 500 index already out, total earnings for the sector are up +11.8% from the same period last year on +5% higher revenues, with +73.3% beating EPS estimates and +56% beating top-line estimates. This is better growth performance than we have seen from the sector in other recent periods.

Strong Finance sector growth is a big driver of the aggregate growth performance for the S&P 500 index as a whole. Excluding the Finance sector, the Q4 growth pace still compares favorably with other recent periods, but a lot less so.

Technology : For the Technology sector, we now have Q4 results from 88.6% of the sector's total market cap. Total earnings for these companies are up +8.2% from the same period last year on +6% higher revenues, with 71.4% beating EPS estimates and 71.4% beating revenue estimates.

This is better earnings growth than we have seen from this same group of Tech companies in Q3 or the preceding four quarters, but is about in-line with the 12-quarter average. Revenue growth, on the other hand, is tracking above historical periods. The revenue outperformance is visible in terms of positive surprises as well, with the proportion of Tech sector positive surprises notably tracking above Q3, the 4-quarter and 12-quarter averages, as you can see in the right-hand side chart. Earnings surprises (green bards in the right-hand chart) are tracking below historical periods, as is the case with other sectors as well.

Q4 Expectations As a Whole

For Q4 as a whole, combining the actual results from the 358 S&P 500 members that have reported with estimates for the still-to-come 142 companies, total earnings are expected to be up +7.5% from the same period last year on +3.9% higher revenues. This would follow the +3.7% growth in Q3 earnings on +2.2% higher revenues, the first instance of positive earnings growth for the index after five quarters of back-to-back declines. Comparisons for the Energy sector, a big driver of the earnings recession, turn positive in Q4, with the sector's earnings growth turning positive for the first time after 8 quarters of declines.

For a complete analysis of the Q4 earnings season, please check out our weekly Earnings Trends report - Positive Earnings Picture .

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American International Group, Inc. (AIG): Free Stock Analysis Report

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