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Zacks Earnings Trends Highlights: JPMorgan, Wells Fargo and Citigroup
Read MoreHide Full Article
For Immediate Release
Chicago, IL – July 12, 2018 – Zacks Director of Research Sheraz Mian says, "For the S&P 500, total Q2 earnings are expected to be up +19.1% from the same period last year on +8.2% higher revenues, with 11 of the 16 Zacks sectors expected to have double-digit earnings growth."
Start of Q2 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 earnings for the 22 S&P 500 members that have reported fiscal May-quarter results (part of our Q2 tally) are up +29% on +12.5% higher revenues. The proportion of these early reporters beating EPS and revenue estimates is tracking above other recent periods.
• For the S&P 500 index as a whole, total Q2 earnings are expected to be up +19.1% from the same period last year on +8.2% higher revenues, with 11 of the 16 Zacks sectors expected to have double-digit earnings growth.
• Q2 estimates moved up modestly since the quarter got underway, in contrast to the very strong positive revisions trend we saw ahead of the start of the start of the Q1 earnings season.
• Q2 estimates for the Energy, Construction, Basic Materials and Tech sectors went up since the quarter got underway, while estimates for the Consumer Discretionary, Consumer Staples, Autos, Finance, and Conglomerate sectors have gone down.
• Tech sector earnings are expected to be up +23.8% on +10.7% higher revenues, which would follow +31.1% earnings growth on +13.1% revenue growth in Q1. Finance sector earnings are expected to be up +18.5% from the same period last year on +3.6% higher revenues.
• Other major sectors with strong expected growth in Q2 include Energy (+139.7% earnings growth), Basic Materials (+53.6%), Industrial Products (+24.5%) and Retail (+18.4%). The Autos and Conglomerates sectors are the only ones expected to have lower Q2 earnings compared to the year-earlier level.
• For the small-cap S&P 600 index, total Q2 earnings are expected to be up +27% on +8.2% higher revenues, which would follow +24.2% earnings growth on +8.6% revenue growth in 2018 Q1.
• For full-year 2018, total earnings for the S&P 500 index are expected to be up +20.3% on +6.2% higher revenues. For full-years 2019 and 2020, total earnings are expected to be up +9.8% and +9.6%, respectively. Revenues for the index are expected to be increase by +4.7% in 2019, and +4.5% in 2020.
• The implied ‘EPS’ for the index, calculated using current 2018 P/E of 17.6X and index close, as of July 10th, is $156.51. Using the same methodology, the index ‘EPS’ works out to $171.78 for 2019 (P/E of 16X) and $188.34 for 2020 (P/E of 14.6X). The multiples for 2018, 2019 and 2020 have been calculated using the index’s total market cap and aggregate bottom-up earnings for each year.
Q2 earnings season Gets Underway
The Q2 earnings season will really get going with the July 13th releases from JPMorgan (JPM - Free Report) , Wells Fargo (WFC - Free Report) and Citigroup (C - Free Report) . But the Q2 earnings season has actually gotten underway, with results from 22 S&P 500 members already out. All of these early results are from companies with fiscal quarters ending in May, but they form part of our June-quarter tally. We will have seen such Q2 results from almost two dozen S&P 500 members with fiscal quarters ending in May by the time the big banks come out with results.
Total earnings for these 22 index members are up +29% on +12.5% higher revenues, with 90.9% beating EPS estimates and 86.4% beating revenue estimates.
It is premature to draw any firm conclusions from this small sample of Q2 results, but two trends nevertheless stand out when we compare the Q2 results from these 22 index members with what these same companies reported in other recent periods. These two standout trends pertain to revenue growth momentum and more numerous EPS surprises.
Q2 Expectations as a Whole
Total Q2 earnings for the S&P 500 index are expected to be up +19.1% from the same period last year on +8.2% higher revenues, with double-digit earnings growth for 11 of the 16 Zacks sectors, including Finance and Technology. This would be the 3rd quarter in a row of double-digit earnings growth for the index, a trend that is currently expected to continue in the second half of the year as well.
Energy sector earnings are expected to more than double from the year-earlier level, up +139.7%. Excluding the Energy sector, Total Q2 earnings for the rest of the index would be up +15.7%.
The growth picture remains very strong, even though it is expected to decelerate from Q1’s lofty level.
The smoother growth trend of the above chart shows that the growth rate will continue to gain pace through the end of this year and start decelerating from that point onwards.
But more important than the growth rate is the trend on revisions front, which turned out to be underwhelming ahead of the start of the Q2 earnings, particularly relative to what we experienced in the comparable period in the Q1 earnings season. We will see if this trend will continue with Q3 estimates as companies report Q2 results and share trends in their businesses.
Given the ongoing strength in the U.S. dollar, questions about the global economy and all-around trade uncertainty, it is possible that estimates for Q3 and beyond come down in the coming days.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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.
Zacks Editor-in-Chief Goes "All In" on This Stock
Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.
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, pleaseclick here>>>
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year. See these high-potential stocks free >>
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.
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 https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Earnings Trends Highlights: JPMorgan, Wells Fargo and Citigroup
For Immediate Release
Chicago, IL – July 12, 2018 – Zacks Director of Research Sheraz Mian says, "For the S&P 500, total Q2 earnings are expected to be up +19.1% from the same period last year on +8.2% higher revenues, with 11 of the 16 Zacks sectors expected to have double-digit earnings growth."
Start of Q2 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 earnings for the 22 S&P 500 members that have reported fiscal May-quarter results (part of our Q2 tally) are up +29% on +12.5% higher revenues. The proportion of these early reporters beating EPS and revenue estimates is tracking above other recent periods.
• For the S&P 500 index as a whole, total Q2 earnings are expected to be up +19.1% from the same period last year on +8.2% higher revenues, with 11 of the 16 Zacks sectors expected to have double-digit earnings growth.
• Q2 estimates moved up modestly since the quarter got underway, in contrast to the very strong positive revisions trend we saw ahead of the start of the start of the Q1 earnings season.
• Q2 estimates for the Energy, Construction, Basic Materials and Tech sectors went up since the quarter got underway, while estimates for the Consumer Discretionary, Consumer Staples, Autos, Finance, and Conglomerate sectors have gone down.
• Tech sector earnings are expected to be up +23.8% on +10.7% higher revenues, which would follow +31.1% earnings growth on +13.1% revenue growth in Q1. Finance sector earnings are expected to be up +18.5% from the same period last year on +3.6% higher revenues.
• Other major sectors with strong expected growth in Q2 include Energy (+139.7% earnings growth), Basic Materials (+53.6%), Industrial Products (+24.5%) and Retail (+18.4%). The Autos and Conglomerates sectors are the only ones expected to have lower Q2 earnings compared to the year-earlier level.
• For the small-cap S&P 600 index, total Q2 earnings are expected to be up +27% on +8.2% higher revenues, which would follow +24.2% earnings growth on +8.6% revenue growth in 2018 Q1.
• For full-year 2018, total earnings for the S&P 500 index are expected to be up +20.3% on +6.2% higher revenues. For full-years 2019 and 2020, total earnings are expected to be up +9.8% and +9.6%, respectively. Revenues for the index are expected to be increase by +4.7% in 2019, and +4.5% in 2020.
• The implied ‘EPS’ for the index, calculated using current 2018 P/E of 17.6X and index close, as of July 10th, is $156.51. Using the same methodology, the index ‘EPS’ works out to $171.78 for 2019 (P/E of 16X) and $188.34 for 2020 (P/E of 14.6X). The multiples for 2018, 2019 and 2020 have been calculated using the index’s total market cap and aggregate bottom-up earnings for each year.
Q2 earnings season Gets Underway
The Q2 earnings season will really get going with the July 13th releases from JPMorgan (JPM - Free Report) , Wells Fargo (WFC - Free Report) and Citigroup (C - Free Report) . But the Q2 earnings season has actually gotten underway, with results from 22 S&P 500 members already out. All of these early results are from companies with fiscal quarters ending in May, but they form part of our June-quarter tally. We will have seen such Q2 results from almost two dozen S&P 500 members with fiscal quarters ending in May by the time the big banks come out with results.
Total earnings for these 22 index members are up +29% on +12.5% higher revenues, with 90.9% beating EPS estimates and 86.4% beating revenue estimates.
It is premature to draw any firm conclusions from this small sample of Q2 results, but two trends nevertheless stand out when we compare the Q2 results from these 22 index members with what these same companies reported in other recent periods. These two standout trends pertain to revenue growth momentum and more numerous EPS surprises.
Q2 Expectations as a Whole
Total Q2 earnings for the S&P 500 index are expected to be up +19.1% from the same period last year on +8.2% higher revenues, with double-digit earnings growth for 11 of the 16 Zacks sectors, including Finance and Technology. This would be the 3rd quarter in a row of double-digit earnings growth for the index, a trend that is currently expected to continue in the second half of the year as well.
Energy sector earnings are expected to more than double from the year-earlier level, up +139.7%. Excluding the Energy sector, Total Q2 earnings for the rest of the index would be up +15.7%.
The growth picture remains very strong, even though it is expected to decelerate from Q1’s lofty level.
The smoother growth trend of the above chart shows that the growth rate will continue to gain pace through the end of this year and start decelerating from that point onwards.
But more important than the growth rate is the trend on revisions front, which turned out to be underwhelming ahead of the start of the Q2 earnings, particularly relative to what we experienced in the comparable period in the Q1 earnings season. We will see if this trend will continue with Q3 estimates as companies report Q2 results and share trends in their businesses.
Given the ongoing strength in the U.S. dollar, questions about the global economy and all-around trade uncertainty, it is possible that estimates for Q3 and beyond come down in the coming days.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>
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.
Zacks Editor-in-Chief Goes "All In" on This Stock
Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.
Download it free >>
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>>>
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year. See these high-potential stocks free >>
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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 https://www.zacks.com/performance for information about the performance numbers displayed in this press release.