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Micron, Nike, FedEx, Applied Materials and Apple are part of Zacks Earnings Preview

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For Immediate Release

Chicago, IL –June 24, 2019 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Micron Technology (MU - Free Report) , Nike (NKE - Free Report) , FedEx (FDX - Free Report) , Applied Materials (AMAT - Free Report) and Apple (AAPL - Free Report) .

Q2 Earnings Season Preview

The Q2 earnings season will really get underway with the mid-July quarterly reports from the big banks, but the reporting cycle has actually gotten underway already. We have Q2 results from 8 S&P 500 members to this point and another 12 index members are on deck to report results this week, including Micron Technology, Nike, FedEx and others.

All of these initial releases are from companies with fiscal quarters ending in May, which we count as part of the June-quarter tally. The fact is that by the time the big banks come around to report June-quarter results on July 14th, we will have seen such Q2 results from almost two dozen S&P 500 members already.

The earnings growth picture is not expected to change much from the flat growth reading in the first quarter. This trend of flat-to-negative growth is expected to persist through the September quarter, with current consensus estimates looking for positive growth resuming in the last quarter of the year. But Q4 is still far away, and a lot can happen between now and then.

For Q2, total earnings for the S&P 500 index will decline -2.9% from the same period last year on +4.3% higher revenues, with 9 of the 16 Zacks sectors expected to have negative earnings growth, including the Tech sector.

The overall tone and substance of management guidance during the last earnings season was on the negative side. This reflected a combination of slowing economic growth, particularly beyond the U.S., and rising input expenses. As a result, analysts steadily lowered their estimates for 2019 Q2.

The recent weak guidance from Applied Materials suggests that we will likely see a replay of what we experienced in the last earnings season, which pushed estimates lower. Micron reporting this week will give us a fresh data point about the beleaguered semiconductor space.

We will be keeping a close eye on how estimates for 2018 Q3 evolve as companies report Q2 results and share their outlook for Q3 and beyond.

The Tech Sector Drag

As you can see, growth is expected to be in negative territory for 8 of the 16 Zacks sectors, with Basic Materials, Aerospace, Technology, Conglomerates and Construction sectors expected to experience double-digit declines.

It is the weak Tech growth that is dragging the aggregate Q2 earnings growth rate for the S&P 500 index into negative territory. The Tech sector is the biggest earnings contributor in the S&P 500 index, bringing in 22.6% of the index’s total earnings in forward 4-quarter period. Excluding the Tech sector’s drag, total earnings growth for the remainder of the index would be down only -0.5%.

Driving the Tech sector’s weak earnings growth expectation for the quarter is Apple and the broader semiconductor space. For Apple, June quarter earnings are expected to be down -16.2% on +0.4% higher revenues. The semiconductors industry has been struggling for the last few quarters and this trend is expected to continue in Q2 as well.

The expectation is that the semiconductor industry’s earnings declines bottom in Q2 and start improving from Q3 onwards.

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