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Zacks Earnings Trends Highlights: JPMorgan

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For Immediate Release

Chicago, IL – April 5, 2018 – Zacks Director of Research Sheraz Mian says, “Total Q1 earnings for the S&P 500 index are expected to be up +16% from the same period last year on +7.4% higher revenues.”

Looking Ahead to Q1 Earnings Season

Note: The following is an excerpt from this week’s Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>

Here are the key points:

•    Total Q1 earnings for the S&P 500 index are expected to be up +16% from the same period last year on +7.4% higher revenues, the highest quarterly earnings growth pace in 7 years.

•    Earnings growth is expected to be in double-digit territory from the year-earlier level for 11 of the 16 Zacks sectors, including the Technology and Finance sectors. Only two sectors (Autos & Conglomerates) are expected to show earnings declines in Q1.

•    Energy sector earnings are expected to be up +60.2% from the same period last year on +15.6% higher revenues. Excluding the Energy sector, total S&P 500 earnings growth drops from +16% to +14.6%.  

•    The earnings season wouldn’t be in the spotlight till the big banks come out with results in a couple of weeks, but the reporting cycle has actually begun as 22 S&P 500 members with fiscal quarters ending in February have reported results already.

•    Earnings estimates for Q1 and the following quarters have improved in a notable way, with estimates for 13 of the 16 Zacks sectors going up.

•    In percentage terms, estimates have gone up the most for the Basic Materials, Energy, Construction and Industrial Products sectors. In absolute terms, the positive revisions to the Finance and Technology sectors account for more than half of all estimate upgrades since the quarter got underway.

•    This positive revisions trend is the most dramatic change on the earnings scene in recent years and will be closely watched whether the trend will continue in the coming days as the Q1 earnings season unfolds.

•    For the S&P 600 index, total Q1 earnings are expected to be up +14.1% from the same period last year on +10% higher revenues. This would follow +14.8% earnings growth on +7.7% revenue growth in the preceding quarter.

•    For full-year 2018, total earnings for the S&P 500 index are track to be up +17.9% on +5.3% higher revenues, with full-year 2019 earnings and revenues for the index expected to be up +9.4% and +4.1%, respectively.

•    The implied ‘EPS’ for the index, calculated using current 2018 P/E of 17X and index close, as of April 4rd , is $153.80. Using the same methodology, the index ‘EPS’ works out to $168.30 for 2019 (P/E of 15.5X). The multiples for 2018 and 2019 have been calculated using the index’s total market cap and aggregate bottom-up earnings for each year.   

The most profound change on the earnings scene lately is the unusually positive revisions trend for Q1 and following quarters. This is a sight that we haven’t seen in a very long time; definitely not in the last 6 years.

The most important factor driving this positive revisions trend is the tax cuts. The rise in oil prices and the impact of uptrend bond yields on banks’ profitability are some of the other factors.

Estimates have gone up across the board for 13 of the 16 Zacks sectors, with the highest percentage positive revisions for the Basic Materials, Energy, Construction, and Industrials. In absolute terms, the positive revisions to the Finance and Technology sectors account for more than half of all aggregate positive revision since mid-December 2017. For example, JPMorgan’s (JPM - Free Report) Q1 EPS estimate of $2.27 has gone up +13.5% over the past three months.

Note: Sheraz Mian manages the Zacks equity research department. He is an acknowledged earnings expert whose commentaries and analyses appear on Zacks.com and in the print and electronic media. His weekly earnings related articles include Earnings 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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Note: Sheraz Mian manages the Zacks equity research department. He is an acknowledged earnings expert whose commentaries and analyses appear on Zacks.com and in the print and electronic media. His weekly earnings related articles include Earnings Trends and Earnings Preview. He manages the Zacks Top 10 and Focus List portfolios and writes the Weekly Market Analysis article for Zacks Premium subscribers.

If you want an email notification each time Sheraz Mian publishes a new article, please click here>>>

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