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Costco and Oracle are part of Zacks Earnings Preview
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For Immediate Release
Chicago, IL – December 11, 2017 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Costco (COST - Free Report) and Oracle (ORCL - Free Report) .
Earnings aren’t the market’s focus at present; the tax legislation currently moving towards a passage in Congress tops everything else. The legislation promises many substantive changes in a number of areas, but it will have a big impact on corporate profitability as well, all of it positive.
The exact earnings impact of the tax legislation will become clear once it is signed into law, but preliminary estimates suggest a material earnings boost. S&P 500 earnings in 2018 are already expected to be up +11.7%, with the growth pace expected to roughly double as a result of the tax legislation. As meaningful as this impact on S&P 500 earnings is, it is far more pronounced for small-cap companies.
We will start seeing this in rising earnings estimates following the completion of the legislation. But we need to be mindful that the estimate revisions trend for Q4 has already been the most favorable relative to last many years. What this means is that the 2017 Q4 estimate revisions trend is unlike any other recent comparable period, with the earnings growth rate for the quarter actually inching up a bit since the quarter got underway.
Estimates for 8 of the 16 Zacks sectors have come down, while the other half experienced positive estimate revisions. The Conglomerates, Consumer Discretionary and Transportation sectors have suffered the most notable negative revisions while the notable positive revisions have taken place in the Energy, Basic Materials, Industrial Products and Technology sectors. The most pronounced positive revisions have taken place in the Energy sector, reflecting developments in oil prices. On an ex-Energy basis, the Q4 earnings growth rate is modestly below the +8.6% rate at the start of the quarter.
We haven’t seen this type of revisions trend in recent years, but this trend will likely become the norm once the tax legislation gets enacted.
Q4 Earnings Season Gets Underway
The Q4 earnings season will not take the spotlight at least through the middle of January, but the reporting season will officially have gotten underway weeks before that. In fact, the Q4 earnings season will get underway this week with the Thursday earnings releases from Costco and Oracle. Both of these companies will be releasing results for their fiscal November-ending quarters, which officially get counted as part of the Q4 tally.
Total Q4 earnings are expected to be up +8.8% from the same period last year on +6.8% higher revenues, which would follow the +6.9% earnings growth on +6% higher revenues in 2017 Q3.
Earnings growth is expected to be positive for 13 of the 16 Zacks sectors, with earnings growth in double-digit territories for 6 sectors – Energy (up +168.7%), Technology (+13.1%), Construction (+19.5%), Industrial Products (+21.3%), Basic Materials (+27.3%), and Autos (+22.5%).
The growth pace is expected to accelerate from the Q3 level in Q4 and beyond.
We have been pointing out that while the earnings growth pace decelerated in Q3, the overall level of total earnings reached an all-time quarterly record. But as you can see in the chart below, the earnings tally for Q4 is expected to exceed what was achieved in the preceding period, creating a new all-time quarterly record.
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.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
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 http://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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Costco and Oracle are part of Zacks Earnings Preview
For Immediate Release
Chicago, IL – December 11, 2017 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Costco (COST - Free Report) and Oracle (ORCL - Free Report) .
To see more earnings analysis, visit http://at.zacks.com/?id=3207.
Earnings Boost from Tax Legislation
Earnings aren’t the market’s focus at present; the tax legislation currently moving towards a passage in Congress tops everything else. The legislation promises many substantive changes in a number of areas, but it will have a big impact on corporate profitability as well, all of it positive.
The exact earnings impact of the tax legislation will become clear once it is signed into law, but preliminary estimates suggest a material earnings boost. S&P 500 earnings in 2018 are already expected to be up +11.7%, with the growth pace expected to roughly double as a result of the tax legislation. As meaningful as this impact on S&P 500 earnings is, it is far more pronounced for small-cap companies.
We will start seeing this in rising earnings estimates following the completion of the legislation. But we need to be mindful that the estimate revisions trend for Q4 has already been the most favorable relative to last many years. What this means is that the 2017 Q4 estimate revisions trend is unlike any other recent comparable period, with the earnings growth rate for the quarter actually inching up a bit since the quarter got underway.
Estimates for 8 of the 16 Zacks sectors have come down, while the other half experienced positive estimate revisions. The Conglomerates, Consumer Discretionary and Transportation sectors have suffered the most notable negative revisions while the notable positive revisions have taken place in the Energy, Basic Materials, Industrial Products and Technology sectors. The most pronounced positive revisions have taken place in the Energy sector, reflecting developments in oil prices. On an ex-Energy basis, the Q4 earnings growth rate is modestly below the +8.6% rate at the start of the quarter.
We haven’t seen this type of revisions trend in recent years, but this trend will likely become the norm once the tax legislation gets enacted.
Q4 Earnings Season Gets Underway
The Q4 earnings season will not take the spotlight at least through the middle of January, but the reporting season will officially have gotten underway weeks before that. In fact, the Q4 earnings season will get underway this week with the Thursday earnings releases from Costco and Oracle. Both of these companies will be releasing results for their fiscal November-ending quarters, which officially get counted as part of the Q4 tally.
Total Q4 earnings are expected to be up +8.8% from the same period last year on +6.8% higher revenues, which would follow the +6.9% earnings growth on +6% higher revenues in 2017 Q3.
Earnings growth is expected to be positive for 13 of the 16 Zacks sectors, with earnings growth in double-digit territories for 6 sectors – Energy (up +168.7%), Technology (+13.1%), Construction (+19.5%), Industrial Products (+21.3%), Basic Materials (+27.3%), and Autos (+22.5%).
The growth pace is expected to accelerate from the Q3 level in Q4 and beyond.
We have been pointing out that while the earnings growth pace decelerated in Q3, the overall level of total earnings reached an all-time quarterly record. But as you can see in the chart below, the earnings tally for Q4 is expected to exceed what was achieved in the preceding period, creating a new all-time quarterly record.
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
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 http://www.zacks.com/performancefor information about the performance numbers displayed in this press release.