For Immediate Release
Chicago, IL - February 09, 2017 - Zacks Director of Research Sheraz Mian says, "We continue to see the picture emerging from the Q4 earnings season as positive and reassuring."
Positive Earnings Picture
Note: The following is an excerpt from this week's Earnings Trends report. You can access the full report that contains detailed historical actuals and estimates for the current and following periods, please click here>>>
We continue to see the picture emerging from the Q4 earnings season as positive and reassuring. Not only is growth on track to reach its highest level in two years, but total earnings are on track to reach a new quarterly record. Estimates for the current period have started coming down, but they aren't falling as much as would typically be the case historically. All of this should add to confidence in consensus expectations for the current and following quarters when growth is expected to notably ramp up.
As of Wednesday, February 8th, we have seen Q4 results from 319 S&P 500 members that combined account for 76.3% of the index's total market capitalization. Total earnings for these 319 index members are up +5.8% on +4.5% higher revenues, with 69.6% beating EPS estimates and 54.5% coming ahead of top-line expectations. The proportion of companies beating both EPS and revenue estimates is 41.4%.
Here are the four things to know about how this earnings season has shaped up:
First , the earnings and revenue growth for this group of 319 index members is notably above other recent periods. The +5.8% Q4 earnings growth on +4.5% revenue growth compares to +2.8% earnings growth on +2.0% revenue growth for this same group of companies in 2016 Q3. The Q4 growth relative to the 4-quarter and 12-quarter averages is even pronounced.
The growth comparisons to prior periods remain favorable even when the Finance sector's strong numbers are excluded from the aggregate results. Excluding the Finance sector, total Q4 earnings growth drops to +4.3% (from +5.8% with Finance) on +4.5% higher revenues (+4.5% with Finance).
The Energy sector hasn't been a material factor this earnings season, with the sector's earnings growth turning positive for the first time in more than two years. Exxon's (NYSE: XOM - Free Report ) +33% higher earnings in Q4 are more than offsetting the tough comparisons at Chevron (NYSE: CVX - Free Report ) and weak results at others to push the sector into positive growth territory.
Second , positive surprises are tracking below historical periods, both for earnings as well as revenues. The 69.6% earnings beat percentage and 54.5% revenue beat percentage are below the 75.5% and 58.9% earnings and revenue beat percentages for this same group of companies in the preceding quarter, respectively. The proportion of Q4 positive surprises are similarly tracking below the 4-quarter and 12-quarter averages. It will be interesting if this trend persists through the rest of this earnings season, likely indicating that estimates didn't fall enough in the run up to the start of this earnings season.
Third , looking at Q4 as a whole, combining the actual results from the 319 S&P 500 companies that have reported with estimates for the still-to-come 181 index members, total earnings are expected to be up +7.3% from the same period last year on +3.9% higher revenues. The +7.3% earnings growth in Q4, the highest since 2014 Q4, 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.
Importantly, the improved Q4 growth is not a result of easy comparisons. In fact, the absolute earnings total for the quarter is on track to be the highest ever.
Fourth , estimates for the current period (2017 Q1) are holding up really well, which is reassuring since expectations for the period already reflected strong gains. Total earnings for the S&P 500 index are currently expected to be up +8.0% from the same period last year on +6.7% higher revenues. This is down from expectations of +10.3% earnings growth on +7.5% revenue growth in early January. This magnitude of negative revisions is about in-line with what we saw in the comparable period for Q4, but better than the quarters prior to that. This could change in the coming days if many more companies come out with results along the lines of Under Armour (NYSE: UAA - Free Report ), Caterpillar (NYSE: CAT - Free Report ), Mattel (NASDAQ: MAT - Free Report ) and others. But the revisions trend thus far is nevertheless reassuring.
All of this combined should add to greater confidence in current consensus expectations for the coming periods when growth is expected to notably pick up.
Note: Sheraz Mian manages the Zacks equity research department. He is an acknowledged earnings expert whose commentaries and analyses appear on Zacks.com and in the print and electronic media. His weekly earnings related articles includeEarnings Trendsand Earnings Preview . He manages the Zacks Top 10 and Focus List portfolios and writes the Weekly Market Analysis article for Zacks Premium subscribers.
If you want an email notification each time Sheraz Mian publishes a new article, pleaseclick here>>>
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year. See these high-potential stocks free >>.
Follow us on Twitter: https://twitter.com/zacksresearch
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks Investment Research
800-767-3771 ext. 9339
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report