Q1 Earnings Season Ramps Up - Earnings Preview

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 ) and Goldman Sachs ( GS ) 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 ) 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 chart below shows the comparison of the results thus far with what we have been seeing from the same group of companies in other recent quarters.

The Composite Picture for Q1

The table below presents the composite summary picture for Q1 contrasted with what companies actually reported in the 2014 Q4 earnings season. What this means is that the data below is presenting Q1 as a whole, combining the actual results from the 25 S&P 500 members that have reported results with estimates from the still-to-come 475 companies.

As you can see in the above summary table, 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 ( BAC ) and the Medical growth is due to the strong growth at Gilead Sciences ( GILD ) and Actavis ( ACT ). 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.

The chart below shows the earnings totals for 2015 Q1 (shaded orange bar - $269.9 billion) contrasted with the actual earnings for the preceding four quarters as well estimates for the following three quarters. The hopes are that Q1 will be the low point for the year, with aggregate earnings moving back into record territory towards the end of the year. Recent history tells otherwise. If history is our guide, then the likely result will be revisions to those lofty estimates in the coming days.

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Note : For a complete analysis of 2015 Q1 estimates, please check out our weekly Earnings Trends report .

Here is a list of the 92 companies reporting this week, including 34 S&P 500 members.

Company Ticker Current Qtr Year-Ago Qtr Last EPS Surprise % Report Day Time
COMMERCE BANCSH CBSH 0.58 0.64 6.15 Monday BTO
BANK OZARKS OZRK 0.45 0.34 0 Monday AMC
TRIANGLE PETROL TPLM 0.02 0.11 25 Monday AMC
LAYNE CHRISTENS LAYN -1.17 -0.59 62 Monday AMC
PEP BOYS M M &J PBY 0.03 -0.02 -90.91 Monday AMC
M&T Bank Corp MTB 1.77 1.66 0.52 Monday N/A
SHAW COMM-TS T.SJR 0.41 0.46 N/A Tuesday BTO
THERATECNOLG-TS T.TH -0.03 -0.06 N/A Tuesday BTO
WELLS FARGO-NEW WFC 0.97 1.05 0 Tuesday BTO
JPMORGAN CHASE JPM 1.38 1.28 -8.46 Tuesday BTO
FASTENAL FAST 0.42 0.38 0 Tuesday BTO
JOHNSON & JOHNS JNJ 1.52 1.54 1.6 Tuesday BTO
SHAW COMMS-CL B SJR 0.32 0.42 -4.88 Tuesday BTO
INTEL CORP INTC 0.4 0.38 12.12 Tuesday AMC
CSX CORP CSX 0.45 0.4 0 Tuesday AMC
LINEAR TEC CORP LLTC 0.53 0.5 4.08 Tuesday AMC
BOSTON PRIV FIN BPFH 0.18 0.19 -36.36 Tuesday AMC
SIMULATION PLUS SLP 0.07 0.05 0 Tuesday AMC
HUNT (JB) TRANS JBHT 0.72 0.58 4.49 Tuesday N/A
BANK OF AMER CP BAC 0.29 -0.05 3.23 Wednesday BTO
PROGRESSIVE COR PGR 0.43 0.41 39.53 Wednesday BTO
PNC FINL SVC CP PNC 1.7 1.82 5.75 Wednesday BTO
US BANCORP USB 0.76 0.73 1.3 Wednesday BTO
DELTA AIR LINES DAL 0.44 0.33 4 Wednesday BTO
WATSCO INC WSO 0.59 0.48 9.52 Wednesday BTO
ASML HOLDING NV ASML 1.06 0.62 26.56 Wednesday BTO
TITAN MACHINERY TITN -0.19 0.35 -33.33 Wednesday BTO
NETFLIX INC NFLX 0.68 0.86 63.64 Wednesday AMC
SANDISK CORP SNDK 0.59 1.32 0 Wednesday AMC
Kinder Morgan KMI 0.22 0.25 -25 Wednesday AMC
UMPQUA HLDGS CP UMPQ 0.29 0.21 -10 Wednesday AMC
WINTRUST FINL WTFC 0.74 0.68 -1.32 Wednesday AMC
UNIVL FST PRODS UFPI 0.43 0.36 2.22 Wednesday AMC
COHEN&STRS INC CNS 0.53 0.43 -30.61 Wednesday AMC
KEYCORP NEW KEY 0.26 0.26 7.69 Thursday BTO
UNITEDHEALTH GP UNH 1.34 1.1 3.33 Thursday BTO
GRAINGER W W GWW 3.14 3.07 -1.06 Thursday BTO
PEOPLES UTD FIN PBCT 0.2 0.19 4.76 Thursday BTO
BLACKROCK INC BLK 4.51 4.43 2.99 Thursday BTO
CITIGROUP INC C 1.4 1.3 -33.33 Thursday BTO
PPG INDS INC PPG 2.34 1.98 7.11 Thursday BTO
GOLDMAN SACHS GS 4.14 4.02 2.1 Thursday BTO
SHERWIN WILLIAM SHW 1.43 1.14 0.74 Thursday BTO
ALLIANCE DATA ADS 3.22 2.66 3.55 Thursday BTO
PHILIP MORRIS PM 1.01 1.19 23.58 Thursday BTO
FIRST REP BK SF FRC 0.69 0.73 0 Thursday BTO
PRIVATEBANCORP PVTB 0.5 0.44 -6 Thursday BTO
WEBSTER FINL CP WBS 0.54 0.5 0 Thursday BTO
BLACKSTONE GRP BX 0.94 0.7 31.58 Thursday BTO
FAIRCHILD SEMI FCS 0.11 0.04 -33.33 Thursday BTO
SONOCO PRODUCTS SON 0.58 0.52 3.13 Thursday BTO
HOME BANCSHARES HOMB 0.47 0.43 0 Thursday BTO
SANDY SPRING SASR 0.41 0.43 -16.28 Thursday BTO
COMVERSE INC CNSI -0.04 0.46 247.62 Thursday BTO
NORD ANGLIA EDU NORD 0.25 0.09 0 Thursday BTO
COMSTOCK MINING LODE -0.01 -0.07 N/A Thursday BTO
TAIWAN SEMI-ADR TSM 0.48 0.31 2.04 Thursday BTO
SCHLUMBERGER LT SLB 0.98 1.21 2.04 Thursday AMC
AMER EXPRESS CO AXP 1.37 1.33 0.72 Thursday AMC
MATTEL INC MAT -0.09 -0.03 -45.83 Thursday AMC
ADV MICRO DEV AMD -0.06 0.02 -100 Thursday AMC
ASSOC BANC CORP ASB 0.29 0.27 3.33 Thursday AMC
EASTGROUP PPTYS EGP 0.87 0.82 0 Thursday AMC
CELANESE CP-A CE 1.32 1.33 7.56 Thursday AMC
CROWN HLDGS INC CCK 0.51 0.57 0 Thursday AMC
CYTEC INDS INC CYT 0.72 0.71 8.2 Thursday AMC
SERVICENOW INC NOW -0.31 -0.19 11.11 Thursday AMC
STREAMLINE HLTH STRM -0.16 -0.13 -27.27 Thursday AMC
AMER RIVER BSH AMRB 0.12 0.12 15.38 Thursday AMC
CHEROKEE INC CHKE 0.17 0.2 22.73 Thursday AMC
INDEP BK MASS INDB 0.6 0.51 2.99 Thursday AMC
BANCO LATINOAME BLX 0.72 0.61 27.4 Thursday AMC
SIGNATURE GROUP SGRH -0.27 -0.06 N/A Thursday AMC
ULTRAPETROL LTD ULTR -0.02 -0.03 N/A Thursday AMC
COBIZ FINL INC COBZ 0.17 0.13 -5.56 Thursday N/A
CONS PORTFOLIO CPSS 0.25 0.21 N/A Thursday N/A
COMERICA INC CMA 0.72 0.73 6.49 Friday BTO
HONEYWELL INTL HON 1.39 1.28 0.7 Friday BTO
SEAGATE TECH STX 1.08 1.34 -0.74 Friday BTO
GENL ELECTRIC GE 0.3 0.33 1.82 Friday BTO
SYNCHRONY FIN SYF 0.65 0.63 8.47 Friday BTO
MEDGENICS INC MDGN -0.34 -0.28 -36.36 Friday BTO

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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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