Markets
FDX

Zacks Earnings Trends Highlights: FedEx

Chicago, IL - September 17, 2015 - Director of Research Sheraz Mian says, "The earnings picture is unlikely to improve in the Q3 earnings season."

Q3 Expectations Continue to Fall

The last earnings season was quite anemic, with growth rates in the negative and top-line weakness notably standing. Unfortunately, the earnings picture is unlikely to improve in the Q3 earnings season either, with total earnings for the S&P 500 index expected to be in the negative again. If two back-to-back quarters of GDP growth is the definition of an economic recession, then two quarters in a row of earnings declines would have to qualify as an earnings recession.

We will have to wait another few weeks for the earnings cycle to really get underway. But judging from current consensus estimates and reports from the likes of FedEx ( FDX ), the outlook isn't very inspiring. Total Q3 earnings for the S&P 500 index are expected to be down -5.6% from the same period last year on -4.4% lower revenues. This would follow earnings decline of -2.1% on -3.4% lower revenues in the preceding quarter.

Energy remains the biggest drag in Q3, as has been the trend in recent quarters, with total Energy sector earnings expected to be down -65% on -36.6% lower revenues. Excluding this Energy sector drag, earnings growth for the remainder of the S&P 500 index would be up +1.6% on +0.8% revenues.

Energy is no doubt a big drag, but there isn't much growth momentum in other sectors aside from Finance and Medical, with earnings growth for half of the 16 Zacks sectors expected to be in the negative. Finance is expected to have another positive quarter, with total earnings for the sector expected to be up +8.8% from the same period last year. Excluding the contribution from the Finance sector, total earnings for the S&P 500 index would be down -8.9% from the year-earlier period.

There is not much growth expected in the last quarter of the year either. This year has effectively been washed out, with growth expected to resume early next year and accelerate from there onwards. Total earnings for the S&P 500 index are effectively flat this year, but are expected to be up in double-digits next year.

It is reasonable to be skeptical of next year's optimistic looking expectations given how the 2015 estimates evaporated in front of our eyes over the last two quarters. We know that sell-side analysts start out with optimistic projections for the outer periods.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today . Find out What is happening in the stock market today on zacks.com.

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

FEDEX CORP (FDX): Free Stock Analysis Report

To read this article on Zacks.com click here.

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.

In This Story

FDX

Other Topics

Earnings

Latest Markets Videos

Zacks

Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

Learn More