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Ford, Texas Instruments, Fastenal, Kansas City Southern and Dover are part of Zacks Earnings Preview
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For Immediate Release
Chicago, IL – October 28, 2019 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Ford (F - Free Report) , Texas Instruments (TXN - Free Report) , Fastenal (FAST - Free Report) , Kansas City Southern and Dover (DOV - Free Report) .
Making Sense of Q3 Earnings Season
With results from almost 40% of S&P 500 members already out, we have a representative enough sample to judge the Q3 earnings season. The market has generally been appreciative of the results, with the median index member up almost four times as much in response to its Q3 earnings report relative to the preceding period.
We look at three metrics in evaluating the aggregate picture emerging out of any reporting cycle. These include the growth rates for earnings and revenue, the beats percentages, and management guidance for the coming periods. Let’s take a look at the Q3 results that have come out already in terms of these three performance metrics.
EPS & Revenue Beats Percentages
For the 199 S&P 500 members that have reported results through Friday, October 25th, 78.4% are beating EPS estimates and 61.8% are beating revenue estimates.
Over the last 12 quarters, the low EPS beats percentage for these 199 index members was 66.3% (2018 Q4) and the high was 82.4% in 2018 Q2, with an average EPS beats percentage of 76.5%. The EPS beats percentage in Q3 started out very high, but currently remains within the 12-quarter range.
On the revenues side, the beats percentage for this group of 199 index members has been as low as 46.7% (2015 Q3) and as high as 77.4% (2017 Q4) over the preceding 12-quarter period. As is the case with the EPS beats percentage, the Q3 revenue beats percentage remains within this historical range.
In other words, S&P 500 members are beating EPS and revenue estimates at a rate that is about in-line with historical trends.
Q3 Earnings & Revenue Growth
For the 199 index members that have reported Q3 results already, total earnings are down -0.3% while total revenues are up +4.5%. Please note that ‘total earnings’ mean ‘aggregate net income’ for the 199 S&P 500 members, not mean, median or market-cap a weighted EPS. We prefer looking at net income as a measure of earnings and not EPS given the distorting effects of share buybacks on EPS-based growth rates.
There is not much earnings growth, which is a function of the tough comparisons to the 2018 period when growth was boosted by the tax-cut legislation. The revenue picture is actually pretty good.
The Guidance Picture
Many in the market appeared to fear a notable uptick in negative guidance for Q4 and beyond, in the wake of renewed signs of deceleration in the global and U.S. economy. Weak guidance from a number of companies like Ford, Texas Instruments and others reflect this reality. But a preponderance of negative guidance from across all major sectors has failed to materialize. In other words, there is no material deterioration in the earnings picture relative to what was expected earlier; Q3 results and guidance for the current and coming quarters have been better than ‘feared.’
The market’s positive reaction to reports from the likes of Fastenal, Kansas City Southern, Dover and a number of the banks likely reflect this ‘better than feared’ aspect of the results.
That said, estimates for the current and coming quarters have been coming down since the Q3 earnings season got underway. The negative revisions trend may accelerate in the coming days, but it is hardly alarming relative to comparable periods in other recent quarters. The chart below shows the evolution of 2019 Q4 growth estimates.
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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Ford, Texas Instruments, Fastenal, Kansas City Southern and Dover are part of Zacks Earnings Preview
For Immediate Release
Chicago, IL – October 28, 2019 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Ford (F - Free Report) , Texas Instruments (TXN - Free Report) , Fastenal (FAST - Free Report) , Kansas City Southern and Dover (DOV - Free Report) .
Making Sense of Q3 Earnings Season
With results from almost 40% of S&P 500 members already out, we have a representative enough sample to judge the Q3 earnings season. The market has generally been appreciative of the results, with the median index member up almost four times as much in response to its Q3 earnings report relative to the preceding period.
We look at three metrics in evaluating the aggregate picture emerging out of any reporting cycle. These include the growth rates for earnings and revenue, the beats percentages, and management guidance for the coming periods. Let’s take a look at the Q3 results that have come out already in terms of these three performance metrics.
EPS & Revenue Beats Percentages
For the 199 S&P 500 members that have reported results through Friday, October 25th, 78.4% are beating EPS estimates and 61.8% are beating revenue estimates.
Over the last 12 quarters, the low EPS beats percentage for these 199 index members was 66.3% (2018 Q4) and the high was 82.4% in 2018 Q2, with an average EPS beats percentage of 76.5%. The EPS beats percentage in Q3 started out very high, but currently remains within the 12-quarter range.
On the revenues side, the beats percentage for this group of 199 index members has been as low as 46.7% (2015 Q3) and as high as 77.4% (2017 Q4) over the preceding 12-quarter period. As is the case with the EPS beats percentage, the Q3 revenue beats percentage remains within this historical range.
In other words, S&P 500 members are beating EPS and revenue estimates at a rate that is about in-line with historical trends.
Q3 Earnings & Revenue Growth
For the 199 index members that have reported Q3 results already, total earnings are down -0.3% while total revenues are up +4.5%. Please note that ‘total earnings’ mean ‘aggregate net income’ for the 199 S&P 500 members, not mean, median or market-cap a weighted EPS. We prefer looking at net income as a measure of earnings and not EPS given the distorting effects of share buybacks on EPS-based growth rates.
There is not much earnings growth, which is a function of the tough comparisons to the 2018 period when growth was boosted by the tax-cut legislation. The revenue picture is actually pretty good.
The Guidance Picture
Many in the market appeared to fear a notable uptick in negative guidance for Q4 and beyond, in the wake of renewed signs of deceleration in the global and U.S. economy. Weak guidance from a number of companies like Ford, Texas Instruments and others reflect this reality. But a preponderance of negative guidance from across all major sectors has failed to materialize. In other words, there is no material deterioration in the earnings picture relative to what was expected earlier; Q3 results and guidance for the current and coming quarters have been better than ‘feared.’
The market’s positive reaction to reports from the likes of Fastenal, Kansas City Southern, Dover and a number of the banks likely reflect this ‘better than feared’ aspect of the results.
That said, estimates for the current and coming quarters have been coming down since the Q3 earnings season got underway. The negative revisions trend may accelerate in the coming days, but it is hardly alarming relative to comparable periods in other recent quarters. The chart below shows the evolution of 2019 Q4 growth estimates.
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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.