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Q4 Earnings Season Scorecard & Top Analyst Reports
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Thursday, February 16 2017
The Zacks Research Daily features the best research output of our analyst team. In today’s write-up, we are featuring analyst reports on 16 major stocks, including reports on Merck (MRK - Free Report) , PNC Financial (PNC - Free Report) and Express Scripts . These reports have been hand-picked from amongst the 70 or so stock research reports published by our analyst team today. You can see all of today’s research reports here >>
In addition to these stock research reports, we are also giving you a real-time scorecard of the ongoing Q4 earnings season. We have a long history of closely monitoring earnings releases and presenting our analysis of emerging aggregate trends in the weekly Earnings Trends and Earnings Preview reports.
Q4 Earnings Scorecard(as of Thursday, February, 16th)
Including all of this morning’s releases, we now have Q4 results from 398 S&P 500 members, or 79.4% of the index's total membership. Total earnings for the 398 index members that have reported results already are up +8% on +5% higher revenues, with 68.8% beating EPS estimates and 55.3% beating revenue estimates.
This is better earnings and revenue growth performance than we have seen from this group of 398 S&P 500 members in other recent periods, even after adjusting for the strong growth from the Finance sector (earnings growth would be +5.4% excluding the Finance sector on +5% higher revenues). The charts below compare the Q4 growth pace with what we had seen from the same group of 398 index members in other recent periods (right-hand chart shows ex-Finance numbers).
The proportion of companies beating EPS and revenue estimates, however, is tracking below other recent periods. Only 41% of the index members are able to beat both EPS and revenue estimates, which compares to 47.2% in the preceding quarter for the same sample of 398 S&P 500 members (the 4-quarter average is 45.1% & the 12-quarter average is 44.6%), as the chart below shows.
Looking at Q4 as a whole, combining the actual results from the 398 index members with estimates from the still-to-come 102 companies, total earnings are expected to be up +7.4% from the same period last year on +3.9% higher revenues. As we have been pointing out all along, this Q4 growth pace continues to be the best growth pace in two years. Importantly, the strong Q4 growth is not a function of easy comparisons, but rather a result of actual gains. The fact is total earnings for the S&P 500 index are on track to reach an all-time quarterly record, surpassing the level achieved in 2014 Q4.
The chart below shows the expected Q4 earnings tally for the index contrasted with what was actually earned in the preceding 8 quarters and what is expected to come in the following 4.
Estimates for the current period (2017 Q1) are holding up fairly well; they are coming down, but not at the pace as would typically expected. Total earnings for the index are currently expected to be up +7.3% in Q1, which is down from +10.3% on January 4th.
Today's Featured Research Reports
Merck shares have gained 28.7% over the last one year, outperforming the Zacks Large Cap Pharma industry which has gained 5.9% over the same period. Merck’s fourth-quarter results were mixed. While earnings beat estimates, sales missed the same due to generic competition for several drugs. However, the Zacks analyst likes Merck’s new products, especially Keytruda, which should continue to contribute meaningfully to the top line. Merck will continue to focus on cost-cutting initiatives to drive the bottom line. Merck has also made significant progress with its pipeline and is working on bringing new products to the market. However, generic competition and pricing pressure will continue to pressurize the top line. (You can read the full research report on Merck here >>)
Buy rated PNC Financial shares outperformed the Zacks Regional Banks industry, over the last three months gaining 15.5% vs. 13.8%. The company’s fourth-quarter 2016 earnings surpassed the Zacks Consensus Estimate, reflecting a marginal rise in net interest income, partially offset by lower non-interest income and a rise in operating expenses. The Zacks analyst likes the company’s efforts to generate positive operating leverage through its cost-saving initiatives. Also, management projects revenues to rise at a mid-single digit rate in 2017, aided by loan growth. Notably, the company’s capital deployment activities are encouraging. (You can read the full research report on PNC Financial here >>)
Express Scripts shares have underperformed medical services market over the last three months. EWhile the company’s guidance for 2017 was encouraging, tough competition in the Pharmacy Benefit Management space and the persistent drug pricing issue are expected to affect the share price. Express Scripts stands to benefit from increased generic utilization, shift toward mail orders, strong specialty growth and an aging population. The company is focused on the development of both specialty drugs and generics, which are expected to account for 50% of the total drug expenditure by 2018. (You can read the full research report on Express Scripts here >>)
Other noteworthy reports we are featuring today include VeriSign (VRSN - Free Report) , TOTAL S.A. and Martin Marietta (MLM - Free Report) .
Today's Long-Term Buys & Sells Today you can gain access to the best long-term trades unearthed by Zacks Research. These moves have double and triple-digit profit potential and are rarely available to the public. Starting now, you can look inside our stocks under $10, home run and value stock portfolios, plus more. Want a peek at this private information? Click here >>
Sheraz Mian
Director of Research
Note: Sheraz Mian heads the Zacks Equity Research department and is a well-regarded expert of aggregate earnings. He is frequently quoted in the print and electronic media and publishes the weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here >>>
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Q4 Earnings Season Scorecard & Top Analyst Reports
Thursday, February 16 2017
The Zacks Research Daily features the best research output of our analyst team. In today’s write-up, we are featuring analyst reports on 16 major stocks, including reports on Merck (MRK - Free Report) , PNC Financial (PNC - Free Report) and Express Scripts . These reports have been hand-picked from amongst the 70 or so stock research reports published by our analyst team today. You can see all of today’s research reports here >>
In addition to these stock research reports, we are also giving you a real-time scorecard of the ongoing Q4 earnings season. We have a long history of closely monitoring earnings releases and presenting our analysis of emerging aggregate trends in the weekly Earnings Trends and Earnings Preview reports.
Our latest Earnings Trends report is: A Positive & Reassuring Earnings Picture
Q4 Earnings Scorecard (as of Thursday, February, 16th)
Including all of this morning’s releases, we now have Q4 results from 398 S&P 500 members, or 79.4% of the index's total membership. Total earnings for the 398 index members that have reported results already are up +8% on +5% higher revenues, with 68.8% beating EPS estimates and 55.3% beating revenue estimates.
This is better earnings and revenue growth performance than we have seen from this group of 398 S&P 500 members in other recent periods, even after adjusting for the strong growth from the Finance sector (earnings growth would be +5.4% excluding the Finance sector on +5% higher revenues). The charts below compare the Q4 growth pace with what we had seen from the same group of 398 index members in other recent periods (right-hand chart shows ex-Finance numbers).
The proportion of companies beating EPS and revenue estimates, however, is tracking below other recent periods. Only 41% of the index members are able to beat both EPS and revenue estimates, which compares to 47.2% in the preceding quarter for the same sample of 398 S&P 500 members (the 4-quarter average is 45.1% & the 12-quarter average is 44.6%), as the chart below shows.
Looking at Q4 as a whole, combining the actual results from the 398 index members with estimates from the still-to-come 102 companies, total earnings are expected to be up +7.4% from the same period last year on +3.9% higher revenues. As we have been pointing out all along, this Q4 growth pace continues to be the best growth pace in two years. Importantly, the strong Q4 growth is not a function of easy comparisons, but rather a result of actual gains. The fact is total earnings for the S&P 500 index are on track to reach an all-time quarterly record, surpassing the level achieved in 2014 Q4.
The chart below shows the expected Q4 earnings tally for the index contrasted with what was actually earned in the preceding 8 quarters and what is expected to come in the following 4.
Estimates for the current period (2017 Q1) are holding up fairly well; they are coming down, but not at the pace as would typically expected. Total earnings for the index are currently expected to be up +7.3% in Q1, which is down from +10.3% on January 4th.
Today's Featured Research Reports
Merck shares have gained 28.7% over the last one year, outperforming the Zacks Large Cap Pharma industry which has gained 5.9% over the same period. Merck’s fourth-quarter results were mixed. While earnings beat estimates, sales missed the same due to generic competition for several drugs. However, the Zacks analyst likes Merck’s new products, especially Keytruda, which should continue to contribute meaningfully to the top line. Merck will continue to focus on cost-cutting initiatives to drive the bottom line. Merck has also made significant progress with its pipeline and is working on bringing new products to the market. However, generic competition and pricing pressure will continue to pressurize the top line. (You can read the full research report on Merck here >>)
Buy rated PNC Financial shares outperformed the Zacks Regional Banks industry, over the last three months gaining 15.5% vs. 13.8%. The company’s fourth-quarter 2016 earnings surpassed the Zacks Consensus Estimate, reflecting a marginal rise in net interest income, partially offset by lower non-interest income and a rise in operating expenses. The Zacks analyst likes the company’s efforts to generate positive operating leverage through its cost-saving initiatives. Also, management projects revenues to rise at a mid-single digit rate in 2017, aided by loan growth. Notably, the company’s capital deployment activities are encouraging. (You can read the full research report on PNC Financial here >>)
Express Scripts shares have underperformed medical services market over the last three months. EWhile the company’s guidance for 2017 was encouraging, tough competition in the Pharmacy Benefit Management space and the persistent drug pricing issue are expected to affect the share price. Express Scripts stands to benefit from increased generic utilization, shift toward mail orders, strong specialty growth and an aging population. The company is focused on the development of both specialty drugs and generics, which are expected to account for 50% of the total drug expenditure by 2018. (You can read the full research report on Express Scripts here >>)
Other noteworthy reports we are featuring today include VeriSign (VRSN - Free Report) , TOTAL S.A. and Martin Marietta (MLM - Free Report) .
Today's Long-Term Buys & Sells
Today you can gain access to the best long-term trades unearthed by Zacks Research. These moves have double and triple-digit profit potential and are rarely available to the public. Starting now, you can look inside our stocks under $10, home run and value stock portfolios, plus more. Want a peek at this private information? Click here >>
Sheraz Mian
Director of Research
Note: Sheraz Mian heads the Zacks Equity Research department and is a well-regarded expert of aggregate earnings. He is frequently quoted in the print and electronic media and publishes the weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here >>>