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What will the Q3 Earnings Season Bring? - Earnings Preview

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The 2014 Q3 earnings season for companies in the S&P 500 index got underway with the Friday morning release from Darden Restaurant ( DRI ). We will get some more Q3 reports this week, with a little over two dozen companies coming out with quarterly results, including 7 S&P 500 members like Adobe Systems ( ADBE ), FedEx ( FDX ) and Oracle ( ORCL ).

All of these early reporters have fiscal quarters ending in August and their earnings reports form part of our Q3 tally. By the end of this month, we will have seen Q3 results from roughly 30 S&P 500 members. But as you can see in the chart below, we will have to wait till the middle of next month for the Q3 reporting cycle to really ramp up.

This earnings season will give us a good sense of whether the profitability strength on display in the last reporting cycle was a one-off event or the start of something enduring. Please recall that part of the Q2 strength was a bounce back from the extremely low levels to which all activity levels had fallen in the weather-disrupted first quarter of the year. As such, one could argue that none of the last two earnings seasons represented truly normal conditions, which we will most likely see for the first time this year only in Q3.

The table below shows a summary picture of current Q3 expectations compared to what was actually achieved in Q2. As you can see, total earnings are expected to be up +3% from the same period last year on +1.4% higher revenues and modest margin gains.

As has been the trend each quarter for quite some time, estimates for Q3 have come down as the quarter has unfolded. The chart below shows estimates for 2014 Q3 have evolved over the last 10 or so weeks.

The negative revisions trend has been broad based, with most sectors suffering downward adjustments in estimates. But the trend has been most pronounced for Oil/Energy, Retail, and Consumer Staples. The chart below shows the sectors with the biggest revisions. As you can see, estimates for Basic Materials and Transportation have gone up.

Estimates for the Finance and Technology sectors have come down, but not by that much. For the Finance sector, total earnings are expected to be up +4% while the Tech sector earnings are expected to be up +3.6%.

Total earnings for the S&P 500 reached an all-time quarterly record in 2014 Q2 and current estimates for Q3 put the quarterly total as the second highest ever. But given the historical trend of roughly two-thirds of the companies beating earnings estimates, the final Q3 tally will likely be right in the preceding quarter's record vicinity. The chart below shows that current consensus estimates reflect record tallies in the following quarters.

For these estimates to hold, we need an improvement on the guidance front, which has been persistently been weak for almost two years now. There was modest improvement in tone of management guidance on the Q2 earnings calls, but the majority of companies providing guidance still guided lower. That said, continuation of even the modest improvement in guidance will be a net positive in the overall earnings picture.

For a detailed at overall earnings picture, please check out our weekly Earnings Trends report .

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Monday-9/15

  • The September Empire State regional manufacturing survey and the August Industrial Production numbers will be coming out after the market opens.

Tuesday -9/16

  • All eyes will be on the Fed today, with the two-day FOMC meeting getting underway, though the post-meeting statement will not come out till Wednesday afternoon. This is one of the quarterly FOMC meetings, meaning that we will get the committee members' forecasts and a press event with the Chairwoman.
  • We will also be getting the August PPI numbers in the morning, with consensus expectations of an 'unchanged' headline reading.
  • Adobe Systems ( ADBE ) will be the key report after the close today.

Wednesday-9/17

  • The FOMC statement and the Janet Yellen press conference in the afternoon are the day's highlights. In the morning, we will get the August CPI and the September homebuilder sentiment index.
  • FedEx ( FDX ), General Mills ( GIS ) and Lennar ( LEN ) are the key earnings reports, all in the morning.

Thursday -9/18

  • In addition to weekly Jobless Claims, we will get the September Philly Fed and the August Housing Starts numbers.
  • ConAgra Foods ( CAG ) is the notable earnings report in the morning, while Oracle ( ORCL ) will report after the close.

Friday-9/19

  • Nothing major on the economic or earnings calendars.

Here is a list of the 28 companies reporting this week, including 7 S&P 500 members.

Company Ticker Current Qtr Year-Ago Qtr Last EPS Surprise % Report Day Time
ANALOGIC CORP ALOG 1.11 1.33 -35 Monday AMC
MAJESCO ENTMNT COOL -0.49 -0.63 -14.29 Monday AMC
AURIS MEDICAL EARS -0.34 N/A N/A Monday BTO
FULL CIRCLE CAP FULL 0.16 0.18 N/A Monday AMC
PARNELL PHARMA PARN -0.1 N/A N/A Monday AMC
STUDENT TRAN-TS T.STB 0.08 0.08 N/A Tuesday BTO
ADOBE SYSTEMS ADBE 0.13 0.21 43.75 Tuesday AMC
APOGEE ENTRPRS APOG 0.27 0.21 -8.7 Tuesday AMC
FACTSET RESH FDS 1.31 1.16 -2.38 Tuesday BTO
PHIBRO ANIMAL PAHC 0.25 N/A 27.27 Tuesday AMC
STUDENT TRAN-TS T.STB 0.08 0.08 0 Tuesday BTO
FEDEX CORP FDX 1.94 1.53 4.24 Wednesday BTO
GENL MILLS GIS 0.68 0.7 -5.63 Wednesday BTO
LENNAR CORP -A LEN 0.67 0.54 19.61 Wednesday BTO
CRACKER BARREL CBRL 1.57 1.43 0.82 Wednesday BTO
CLARCOR INC CLC 0.79 0.67 24.59 Wednesday AMC
HERMAN MILLER MLHR 0.46 0.43 8.7 Wednesday AMC
PIER 1 IMPORTS PIR 0.13 0.17 -20 Wednesday AMC
ROSETTA GENOMIC ROSG N/A N/A N/A Wednesday AMC
UTD NATURAL FDS UNFI 0.65 0.65 -1.35 Wednesday AMC
CONAGRA FOODS CAG 0.35 0.37 -3.51 Thursday BTO
ORACLE CORP ORCL 0.6 0.56 -4.35 Thursday AMC
RED HAT INC RHT 0.26 0.24 9.09 Thursday AMC
IHS INC-A IHS 0.9 0.83 14.14 Thursday BTO
MARCUS CORP MCS 0.5 0.5 6.67 Thursday BTO
RITE AID CORP RAD 0.06 0.08 0 Thursday BTO
TIBCO SOFTWARE TIBX 0.13 0.24 11.11 Thursday AMC
ZYNEX INC ZYXI -0.03 -0.06 -25 Thursday 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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