J.P. Morgan, Bank of America, Gilead Sciences and Actavis are part of Zacks Earnings Preview: - Press Releases

For Immediate Release

Chicago, IL - April 14, 2015 - releases the list of companies likely to issue earnings surprises. This week's list includes J.P. Morgan ( JPM - Free Report ), Bank of America ( BAC - Free Report ), Gilead Sciences ( GILD - Free Report ) and Actavis ( ACT - Free Report ).

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Q1 Earnings Season Ramps Up

The 2015 Q1 reporting season is underway, with results from 25 S&P 500 members already out. The reporting pace accelerates this week, with just over 90 companies announcing first-quarter results, including 34 S&P 500 members. While the Finance sector is heavily represented on this week's reporting docket, we have enough bellwethers from other sectors to give us a good sense of this earnings season.

The overall story of Finance sector profitability is unlikely to change this earnings season, which comes across in the sector's flat stock market performance year to date. There is no change on the net interest margins front, with a combination of low treasury yields and competition for loans keeping margins under pressure. Loan growth has been steadily improving in recent quarters, but is expected to remain seasonally soft in Q1, with positive momentum in commercial categories (commercial & industrial as well as commercial real estate) getting partly offset by weakness on the consumer side.

With respect to trading revenues, favorable earlier commentary from J.P. Morgan ( JPM - Free Report ) and others has raised hopes about performance. But the overall aggregate trend for trading revenues still remains to the down side, with aggregate trading revenues declining in 14 out of the last 20 quarters.

For the Finance sector as whole, total earnings are expected to be up +9% from the same period last year, with easy comparisons at Bank of America ( BAC - Free Report ) accounting for a big part of the sector's stronger-looking growth profile. Excluding Bank of America from the Finance sector, total Q1 earnings growth for the sector drops to +2.4% (from +9%).

2015 Q1 Earnings Scorecard

As of April 13th, we have seen Q1 result from 25 S&P 500 members (most of these companies have fiscal quarters ending in February). Total earnings for these companies are up +10.2% on +7.4% revenue gains, with 80% beating EPS estimates and 44% coming ahead of revenue expectations.

Comparing the results from these 25 S&P 500 members with what we have been seeing from the same companies in other recent quarters shows that:

1. The earnings and revenue growth rates are below what we have been seeing in other recent quarters

2. The earnings beat ratios are in-line with the preceding quarter (2014 Q4), but better than the 4-quarter average,

3. The revenue beat ratios are below what these same companies reported in the preceding as well as 4-quarter average.

The Composite Picture for Q1

Total Q1 earnings are expected to be down -5.2% from the same period last on -4.7% lower revenues, with Energy as the biggest drag on the growth rate. Excluding Energy, total earnings for the remainder of the S&P 500 index would be up a decent enough +2.4% on +1.4% higher revenues.

Among the major sectors, Transportation, and Autos are big growth contributors this quarter, with Transportation earnings expected to be up +21.3% and Autos earnings up +19.7%. Further, Finance is up 3.1%, while Medical is up 6.8%; we should keep in mind however that a small number of companies are accounting for most of the growth for these two sectors - Finance growth is solely due to easy comparisons for Bank of America and the Medical growth is due to the strong growth at Gilead Sciences ( GILD - Free Report ) and Actavis ( ACT - Free Report ). Exclude these three companies from the ex-Energy growth rate for the index, we are not left with much.

Will Q1 be the Low Point for the Year?

We haven't had much earnings growth lately and the growth rate for Q1 is expected to turn negative. Not only is the growth rate for Q1 so low, but the overall level of total earnings for the S&P 500 index are also expected to be the lowest in two years. This will be a material change from the last two quarters when aggregate earnings for the index reached all-time record levels.

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JPMORGAN CHASE (JPM): Free Stock Analysis Report

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

GILEAD SCIENCES (GILD): Free Stock Analysis Report

ACTAVIS PLC (ACT): 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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