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Caterpillar, Apple, Facebook and Microsoft are part of Zacks Earnings Preview
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For Immediate Release
Chicago, IL – January 28, 2018 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Caterpillar (CAT - Free Report) , Apple (AAPL - Free Report) , Facebook and Microsoft (MSFT - Free Report) .
Positive EPS & Revenue Surprises Hard to Come By
We were unimpressed with the Q4 earnings season from the get go and that initial view has been confirmed by the bigger sample of reports we have seen since then. A few notable standout reports notwithstanding, the overall tone and substance of this earnings season is on the weak side.
Plenty of reports are still to come, with this week alone bringing in almost 400 earnings releases, including 121 from S&P 500 members. But with results from 113 S&P 500 members already out, the trends established already will most likely carry through the rest of this reporting cycle.
We will share the current scorecard and what’s on deck this week a little later, but let’s first point out the key trends that we have seen from the Q4 results that have come out through Friday, January 25th.
First, growth is decelerating. This isn’t a surprise, as we knew already that Q4 growth would be materially below the pace set in the first three quarters of the year.
Total earnings for the 113 index members that have reported are up +12.4% from the same period last year on +6.5% higher revenues. Earnings and revenue growth for the same cohort of companies had been +19.2% and +7.9% in the preceding earnings season. The comparison chart below puts this growth deceleration in a historical context for these 113 index members.
The growth pace is on track to decelerate even further in the current and coming quarters, as we will explain a little later.
Second, companies appear to be struggling to beat consensus EPS and revenue estimates.
For the 113 index members that have reported results already, 67.3% are beating EPS estimates and only 58.4% are beating revenue estimates. For the same cohort of companies, the proportion of positive EPS and revenue surprises was 80.5% and 61.9% in the Q3 earnings season.
The lag on this front earlier on was more notable on the revenues side, with revenue beats tracking below historical periods. But EPS beats are even more notably tracking below historical periods. The fact is that the Q4 EPS and revenue beats percentages are the lowest since the fourth quarter of 2016.
With Q4 positive surprises this hard to come by, one would reasonably assume that perhaps estimates had been too high. We know that wasn’t the case as estimates for the quarter had fallen the most of any other recent periods.
Third, estimates for 2019 Q1 and full-year 2019 are coming down in a major way, with the Q1 growth rate at risk of falling into negative territory.
The negative revisions to 2019 Q1 estimates are along the same lines that we saw ahead of the start of the Q4 earnings season as well. Estimates for full-year 2019 have been coming down as well. Estimates were effectively unchanged during the September quarter, but they have been on a consistent downtrend since early October. Many in the market suspect that estimates have further to drop before stabilizing.
Key Earnings Reports – First Half of This Week
We have almost 400 companies coming out with quarterly reports this week, including 121 S&P 500 members.
Monday, January 28th: Caterpillar will be the more prominent of the three S&P 500 members reporting results on Monday. This trade-levered bellwether struggled last year and was down big following the last earnings release. The revisions trend has been stable-to-positive ahead of this earnings release.
Tuesday, January 29th: We have 37 index members reporting results on Tuesday, of which 20 will come out before the market’s open and the rest after the market’s close. There is no shortage of big-name reporters today, but Apple will be the day’s highlight as the iPhone maker comes out with results after the market’s close. Estimates have come down notably since management’s negative preannouncement early this month. The stock is down big since the last earnings release on November 1st, which suggests that even modestly decent numbers will push it higher.
Wednesday, January 30th: Facebook and Microsoft will be the more prominent of the 27 S&P 500 members reporting results on Wednesday. It is amazing how market sentiment has shifted for these two tech bellwethers, with Facebook unable to get a break and Microsoft emerging as a cloud play. It will be interesting to see if Intel’s negative commentary about cloud spending is confirmed by Microsoft.
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/performance for information about the performance numbers displayed in this press release.
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Caterpillar, Apple, Facebook and Microsoft are part of Zacks Earnings Preview
For Immediate Release
Chicago, IL – January 28, 2018 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Caterpillar (CAT - Free Report) , Apple (AAPL - Free Report) , Facebook and Microsoft (MSFT - Free Report) .
Positive EPS & Revenue Surprises Hard to Come By
We were unimpressed with the Q4 earnings season from the get go and that initial view has been confirmed by the bigger sample of reports we have seen since then. A few notable standout reports notwithstanding, the overall tone and substance of this earnings season is on the weak side.
Plenty of reports are still to come, with this week alone bringing in almost 400 earnings releases, including 121 from S&P 500 members. But with results from 113 S&P 500 members already out, the trends established already will most likely carry through the rest of this reporting cycle.
We will share the current scorecard and what’s on deck this week a little later, but let’s first point out the key trends that we have seen from the Q4 results that have come out through Friday, January 25th.
First, growth is decelerating. This isn’t a surprise, as we knew already that Q4 growth would be materially below the pace set in the first three quarters of the year.
Total earnings for the 113 index members that have reported are up +12.4% from the same period last year on +6.5% higher revenues. Earnings and revenue growth for the same cohort of companies had been +19.2% and +7.9% in the preceding earnings season. The comparison chart below puts this growth deceleration in a historical context for these 113 index members.
The growth pace is on track to decelerate even further in the current and coming quarters, as we will explain a little later.
Second, companies appear to be struggling to beat consensus EPS and revenue estimates.
For the 113 index members that have reported results already, 67.3% are beating EPS estimates and only 58.4% are beating revenue estimates. For the same cohort of companies, the proportion of positive EPS and revenue surprises was 80.5% and 61.9% in the Q3 earnings season.
The lag on this front earlier on was more notable on the revenues side, with revenue beats tracking below historical periods. But EPS beats are even more notably tracking below historical periods. The fact is that the Q4 EPS and revenue beats percentages are the lowest since the fourth quarter of 2016.
With Q4 positive surprises this hard to come by, one would reasonably assume that perhaps estimates had been too high. We know that wasn’t the case as estimates for the quarter had fallen the most of any other recent periods.
Third, estimates for 2019 Q1 and full-year 2019 are coming down in a major way, with the Q1 growth rate at risk of falling into negative territory.
The negative revisions to 2019 Q1 estimates are along the same lines that we saw ahead of the start of the Q4 earnings season as well. Estimates for full-year 2019 have been coming down as well. Estimates were effectively unchanged during the September quarter, but they have been on a consistent downtrend since early October. Many in the market suspect that estimates have further to drop before stabilizing.
Key Earnings Reports – First Half of This Week
We have almost 400 companies coming out with quarterly reports this week, including 121 S&P 500 members.
Monday, January 28th: Caterpillar will be the more prominent of the three S&P 500 members reporting results on Monday. This trade-levered bellwether struggled last year and was down big following the last earnings release. The revisions trend has been stable-to-positive ahead of this earnings release.
Tuesday, January 29th: We have 37 index members reporting results on Tuesday, of which 20 will come out before the market’s open and the rest after the market’s close. There is no shortage of big-name reporters today, but Apple will be the day’s highlight as the iPhone maker comes out with results after the market’s close. Estimates have come down notably since management’s negative preannouncement early this month. The stock is down big since the last earnings release on November 1st, which suggests that even modestly decent numbers will push it higher.
Wednesday, January 30th: Facebook and Microsoft will be the more prominent of the 27 S&P 500 members reporting results on Wednesday. It is amazing how market sentiment has shifted for these two tech bellwethers, with Facebook unable to get a break and Microsoft emerging as a cloud play. It will be interesting to see if Intel’s negative commentary about cloud spending is confirmed by Microsoft.
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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.
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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/performance for information about the performance numbers displayed in this press release.