Back to top

Analyst Blog

Sheraz Mian

Much Ado About Earnings (Guidance)


 ZacksTrade Now

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at or call 800-767-3771 ext.  9339.

t’s all about corporate earnings at this stage. And on that count, it’s not so much about how companies do relative to third quarter expectations, but rather what kind of guidance they provide for the fourth quarter and beyond. The earnings-related anxiety so much on display in recent days primarily reflects how the earnings picture will evolve as a result of this earnings season.

We don’t have any discernible trend emerging as yet at this admittedly early stage, but do the stronger-looking earnings reports from banking bellwethers J.P. Morgan (JPM - Analyst Report) and Wells Fargo (WFC - Analyst Report) tell us anything about the broader third quarter earnings season? Of the two results, J.P. Morgan clearly came out ahead of expectations and has strong results, but we can’t say the same about Wells Fargo.

The funny thing is that of the two banking giants, it is Wells that resembles more a traditional banking entity, not J.P. Morgan. As the 'London Whale' episode of the recent past shows, J.P. Morgan is too complex of a banking institution for investors to properly size up. As such, while a solid earnings beat from J.P. Morgan is welcome, it doesn’t tell us much about how the earnings season will unfold.

We should also keep in mind that the Finance sector as a whole is expected to produce strong earnings growth in the third quarter, as it did in the previous one. Total Finance sector earnings in the third quarter are expected to be up 14.2% from the same period last year, the second-highest growth expected of any of the 16 Zacks sectors.

 Construction is expected to have the highest earnings growth rate at almost 45%, but Construction is too small a slice of the total earnings pie at less than 0.5% of the total, whereas Finance is the second largest earnings contributor, after Tech, at almost 18% of the total. Excluding the strong growth contribution from Finance, the roughly 3% decline in total 3rd quarter earnings drops even further to about 7%.

As I have stated in this space in the past, the key take-away from this earnings season will be how it shapes our expectations for the fourth quarter and beyond, which seem unreasonably elevated at this stage. The earnings anxiety referred to above is primarily about how the earnings outlook for the fourth quarter and beyond will shape up as a result of this earnings season. Today’s J.P. Morgan result is welcome, but doesn't help much in addressing the anxiety.

Please login to or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research


Are you a new Zacks Member or a visitor to

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
BITAUTO HOLD BITA 35.33 +14.82%
ANI PHARMACE ANIP 24.79 +14.66%
E HOUSECHINA EJ 10.99 +9.24%
CANADIAN SOL CSIQ 26.97 +7.15%