Citigroup, Alphabet, Facebook, Microsoft, and Intel are part of Zacks Earnings Preview

For Immediate Release

Chicago, IL - February 08, 2016 - releases the list of companies likely to issue earnings surprises. This week's list includes Citigroup ( C ), Alphabet ( GOOGL ), Facebook ( FB ), Microsoft ( MSFT ) and Intel ( INTC ).

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Earnings Growth Challenges Continue

Plenty of earnings reports are still to come, but the Q4 reporting cycle is past its peak, with results from 62% of the S&P 500 members already out. With 68 index members reporting results this week, the earnings season will be over for 76% of S&P 500 members by the end of this week.

The picture emerging from this earnings season is one of all around weakness, with growth hard to come by in the face of a slowing global economy, the strong U.S. dollar, and weakness in the oil and other commodity sectors. This isn't a new problem, we have been discussing these headwinds the last few reporting cycles as well. In other words, the earnings recession continues with Q4 earnings for the S&P 500 index on track to be below the year-earlier level - the third quarter in a row of negative earnings growth for the index.

Recent weakness in oil and other commodity prices has effectively guaranteed that this negative growth trend will continue into the current and following periods as well. In fact, all of the earnings growth for the S&P 500 index in 2016 is now entirely expected to come in the back half of the year, with growth in the first half of the year now expected to be in the negative. Earnings growth in the current period is now expected to be in the negative while 2016 Q2 is flat from the year-earlier level.

Q4 Scorecard ( as of Friday, February 5th )

Total earnings for the 314 S&P 500 members that have reported results already are down -5.7% on -5.2% lower revenues, with 69.2% beating EPS estimates and 46.7% coming ahead of top-line expectations. With these 314 index members accounting for 74.4% of the index's total market capitalization, we have effectively crossed the halfway mark in the Q4 reporting cycle.

The aggregate growth picture is actually even weaker once adjusted for the +7.4% growth in the Finance sector, which itself is benefiting from easy comparisons at Citigroup ( C ). Excluding the Finance sector, total earnings for the rest of the index members that have reported results would be down -8.9% on -6.1% lower revenues.

While growth for these 314 index members is notably below what we had seen from the same group of companies in other recent periods, the beat ratios are in-line or better relative to other recent periods. This likely means nothing more than estimates had likely fallen more than they needed to in the run up to the start of the Q4 earnings season.

This growth & surprise dichotomy is particularly notable for the Technology sector, though surprises have been fairly numerous in the Medical and Finance sectors as well. We referred to the Finance sector earlier. For the Medical sector, earnings for the 65.4% of the sector companies that have reported are up +7.0% from the same period last year on +9.1% higher revenues, with 82.4% beating EPS estimates and 67.6% beating revenue estimates.

With results from 44 of the 64 Tech sector companies in the S&P 500 index already out that combined account for 87.9% of sector's total market cap in the index, total earnings for the quarter are flat 0.0% on +2.1% higher revenues, with 75% beating EPS estimates and 61.4% beating revenue estimates. Strong growth from the likes of Google's parent Alphabet ( GOOGL ), Facebook ( FB ) and a few others was offset by flat to modestly down growth at legacy players like Microsoft ( MSFT ), Intel ( INTC ) and others. Even Apple's earnings were barely in the positive territory in Q4, and its estimates for the current period have been coming down following the Q4 report.

In terms of weak revenue surprises, the sectors that stand out include Utilities (0% revenue beat ratio), Basic Materials (only 14.3% have beat revenues), Transportation (only 7.7% beating revenue estimates), Retail (13.3%) and Aerospace (25%).

Q4 As a Whole

The composite (or blended) growth rate for Q4, combining the actual results from the 314 index members that have reported results with estimates for the still-to-come 186 members, shows total earnings declining by -6.1% from the same period last year on -3.9% lower revenues, the third straight quarter of earnings declines for the index.

While Energy remains the big drag, as it has been in other recent quarters, the weakness is broad-based, with 10 of the 16 sectors expected to suffer earnings declines. Total earnings for the Energy sector are expected be down -79.5% on -35.4% lower revenues. Excluding Energy, earnings growth for the S&P 500 would be modestly in the positive (up +0.3% on +0.3% higher revenues).

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CITIGROUP INC (C): Free Stock Analysis Report

ALPHABET INC-A (GOOGL): Free Stock Analysis Report

FACEBOOK INC-A (FB): Free Stock Analysis Report

MICROSOFT CORP (MSFT): Free Stock Analysis Report

INTEL CORP (INTC): Free Stock Analysis Report

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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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