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Zacks Earnings Trends Highlights: Apple, Alphabet and Facebook
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For Immediate Release
Chicago, IL – September 20, 2018 – Zacks Director of Research Sheraz Mian says, “Total earnings for the S&P 500 index are expected to be up +17.6% in Q3 from the same period last year on +7.3% higher revenues, the 6th time in the last 7 quarters of double-digit earnings growth.”
Q3 Earnings Season Gets Underway
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 S&P 500 index are expected to be up +17.6% in Q3 from the same period last year on +7.3% higher revenues, the 6th time in the last 7 quarters of double-digit earnings growth.
Q3 earnings growth is expected to be in double-digits territory for 10 of the 16 Zacks sectors, with Energy, Finance, Construction, Basic Materials and Technology sectors with the strongest growth, and Conglomerates and Autos expected to experience modest earnings declines.
Estimates for Q3 came down as the quarter got underway, in contrast to the positive revisions trend that we have been experiencing in the comparable periods of the last three earnings seasons. This revisions trend is in-line with the long-run historical trend (beyond the last three quarters).
Growth in Q2 reached its highest level since 2010 at +25.4% earnings growth on +9.8% revenue gains, eclipsing the pace set in 2018 Q1.
For the small-cap S&P 600 index, total Q3 earnings are expected to be up +21.5% from the same period last year on +7.6% higher revenues. This would follow +31.7% earnings growth on +8.9% revenue growth in 2018 Q2.
For full-year 2018, total earnings for the S&P 500 index are expected to be up +20.7% on +6.7% higher revenues. For full-year 2019, total earnings are expected to be up +9.7% on +5.1% higher revenues.
The implied ‘EPS’ for the index, calculated using current 2018 P/E of 18.4X and index close, as of September 18th, is $157.74. Using the same methodology, the index ‘EPS’ works out to $173.10 for2019 (P/E of 16.8X). 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 tax cuts have proved a major boot to corporate profitability, but the earnings picture was fairly robust even before the tax reform took effect. The estimate revisions trend shifted over the preceding three quarters from negative to positive as another by product of the tax-law change. But this effect has started wearing off already, with estimates for the current period (2018 Q3) coming down since the quarter got underway, as the chart below shows.
Estimates have come down for 13 of the 16 Zacks sectors, with Staples, Discretionary, Conglomerates, Autos and Business Services experiencing relatively more notable negative revisions.
Of the two largest earnings contributors to the S&P 500 index, Technology and Finance, estimates have come down for the Finance sector while Tech sector estimates have modestly gone up. The positive revisions trend for the Tech sector isn’t across the board, with some major players like Apple (AAPL - Free Report) and Alphabet (GOOGL - Free Report) experiencing positive estimate revisions while others like Facebook experiencing estimates cuts.
As you can see, the growth picture remains very strong, even though it is expected to decelerate in the current and coming quarters. But more important than the growth rate is the revisions trend, which reversed course after staying broadly positive over the last three quarters.
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 continue coming down in the coming days.
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: Apple, Alphabet and Facebook
For Immediate Release
Chicago, IL – September 20, 2018 – Zacks Director of Research Sheraz Mian says, “Total earnings for the S&P 500 index are expected to be up +17.6% in Q3 from the same period last year on +7.3% higher revenues, the 6th time in the last 7 quarters of double-digit earnings growth.”
Q3 Earnings Season Gets Underway
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 S&P 500 index are expected to be up +17.6% in Q3 from the same period last year on +7.3% higher revenues, the 6th time in the last 7 quarters of double-digit earnings growth.
Q3 earnings growth is expected to be in double-digits territory for 10 of the 16 Zacks sectors, with Energy, Finance, Construction, Basic Materials and Technology sectors with the strongest growth, and Conglomerates and Autos expected to experience modest earnings declines.
Estimates for Q3 came down as the quarter got underway, in contrast to the positive revisions trend that we have been experiencing in the comparable periods of the last three earnings seasons. This revisions trend is in-line with the long-run historical trend (beyond the last three quarters).
Growth in Q2 reached its highest level since 2010 at +25.4% earnings growth on +9.8% revenue gains, eclipsing the pace set in 2018 Q1.
For the small-cap S&P 600 index, total Q3 earnings are expected to be up +21.5% from the same period last year on +7.6% higher revenues. This would follow +31.7% earnings growth on +8.9% revenue growth in 2018 Q2.
For full-year 2018, total earnings for the S&P 500 index are expected to be up +20.7% on +6.7% higher revenues. For full-year 2019, total earnings are expected to be up +9.7% on +5.1% higher revenues.
The implied ‘EPS’ for the index, calculated using current 2018 P/E of 18.4X and index close, as of September 18th, is $157.74. Using the same methodology, the index ‘EPS’ works out to $173.10 for2019 (P/E of 16.8X). 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 tax cuts have proved a major boot to corporate profitability, but the earnings picture was fairly robust even before the tax reform took effect. The estimate revisions trend shifted over the preceding three quarters from negative to positive as another by product of the tax-law change. But this effect has started wearing off already, with estimates for the current period (2018 Q3) coming down since the quarter got underway, as the chart below shows.
Estimates have come down for 13 of the 16 Zacks sectors, with Staples, Discretionary, Conglomerates, Autos and Business Services experiencing relatively more notable negative revisions.
Of the two largest earnings contributors to the S&P 500 index, Technology and Finance, estimates have come down for the Finance sector while Tech sector estimates have modestly gone up. The positive revisions trend for the Tech sector isn’t across the board, with some major players like Apple (AAPL - Free Report) and Alphabet (GOOGL - Free Report) experiencing positive estimate revisions while others like Facebook experiencing estimates cuts.
As you can see, the growth picture remains very strong, even though it is expected to decelerate in the current and coming quarters. But more important than the growth rate is the revisions trend, which reversed course after staying broadly positive over the last three quarters.
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 continue coming down in the coming days.
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.