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Zacks Earnings Trends Highlights: Exxon and Chevron

For Immediate Release

Chicago, IL - February 16, 2017 - Zacks Director of Research Sheraz Mian says, "This should add to confidence in consensus expectations for the current and following quarters when growth is expected to notably ramp up"

A Positive and Reassuring 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>>>

With 75% of Q4 results already out, the earnings picture continues to be 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 15th, we have seen Q4 results from 375 S&P 500 members or 75% of the index's total membership. Total earnings for these 375 index members are up +7.2% on +4.6% higher revenues, with 68.8% beating EPS estimates and 54.4% coming ahead of top-line expectations. The proportion of companies beating both EPS and revenue estimates is 40%.

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 375 index members is notably above other recent periods. The +7.2% Q4 earnings growth on +4.6% revenue growth compares to +3.0% earnings growth on +2.3% 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 +4.4% (from +7.2% with Finance) on +4.5% higher revenues (+4.6% 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 68.8% earnings beat percentage and 54.4% revenue beat percentage are below the 74.4% and 56.8% 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.

Third , looking at Q4 as a whole, combining the actual results from the 375 S&P 500 companies that have reported with estimates for the still-to-come 125 index members, total earnings are expected to be up +7.4% from the same period last year on +3.9% higher revenues. The +7.4% 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 +7.4% from the same period last year on +6.8% higher revenues. This is down from expectations of +10.3% earnings 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.

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.

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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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