Zacks Earnings Trends Highlights: Exxon, Chevron, Under Armour, Caterpillar and Mattel

For Immediate Release

Chicago, IL - February 02, 2017 - Zacks Director of Research Sheraz Mian says, "Expect confidence in consensus expectations for the current and following quarters when growth is expected to notably ramp up."

4 Things to Know About Q4 Earnings Season

Note: The following is an excerpt from this week'sEarnings Trendsreport. You can access the full report that contains detailed historical actuals and estimates for the current and following periods,please click here>>>

The picture emerging from the ongoing Q4 earnings season is one of steady improvement in the overall corporate earnings picture, with growth on track to reach its highest level in two years. 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 1st, we have seen Q4 results from 219 S&P 500 members or 58.8% of the index's total market capitalization. Total earnings for these 219 index members are up +5.4% on +3.5% higher revenues, with 64.8% beating EPS estimates and 53.4% coming ahead of top-line expectations. The proportion of companies beating both EPS and revenue estimates is 37.4%.

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 219 index members is notably above other recent periods. The +5.4% Q4 earnings growth on +3.5% revenue growth compares to +2.7% earnings growth on +1.0% 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 +3.3% (from +5.4% with Finance) on +3.3% higher revenues (+3.5% 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 64.8% earnings beat percentage and 53.4% revenue beat percentage are below the 77.6% and 60.7% 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 219 S&P 500 companies that have reported with estimates for the still-to-come 281 index members, total earnings are expected to be up +6.0% from the same period last year on +3.9% higher revenues. The +6.0% 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 third highest ever. The all-time quarterly record was established in 2014 Q4, but the 2016 Q4 tally is right in that vicinity.

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 +8.7% from the same period last year on +7.2% 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 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.

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Exxon Mobil Corporation (XOM): Free Stock Analysis Report

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Mattel, Inc. (MAT): 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.

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