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For Immediate Release
Chicago, IL – December 17, 2012 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Alcoa (AA - Analyst Report), Oracle (ORCL - Analyst Report), FedEx (FDX - Analyst Report), Discover Financial (DFS - Analyst Report) and Nike (NKE - Analyst Report).
To see more earnings analysis, visit http://at.zacks.com/?id=3207.
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Q4 Earnings Season Gets Underway
We are still some days away from what is ‘unofficially’ considered the start of the fourth earnings season when aluminum producer Alcoa (AA - Analyst Report) reports results on January 8th. But we ‘officially’ count all companies that have financial quarters ending in November as part of our fourth quarter results tally.
As such, while taking nothing away from Alcoa’s first-to-report status, we will be counting Tech giant Oracle’s (ORCL - Analyst Report) earnings report after the close on Tuesday as the start of the fourth quarter reporting season. And Oracle is not alone; we have a total of 45 companies reporting results this week, including 16 S&P 500 members. Companies reporting results include FedEx (FDX - Analyst Report) on Wednesday, and Discover Financial (DFS - Analyst Report) and Nike (NKE - Analyst Report) on Thursday. But in fairness to Alcoa, the reporting cycle each quarter really gets going after it comes out with results.
Earnings expectations for the fourth quarter have been steadily coming down over the last three months, but they still remain positive. At present, total earnings for companies in the S&P 500 are expected to be up 1.2% from the same period last year. This is a sharp drop from the roughly 7% earnings growth rate that consensus expected just three months ago. That said, it is still a better performance than what was expected in the third quarter just before the start of that reporting cycle.
At this stage in the third quarter, total earnings were expected to be down 3.4% from the same period last year. Actual results came out a little better than that, with total third quarter earnings just barely in positive territory (up only 0.1%) on essentially flat revenues (down 0.5%). Excluding Finance, total earnings in the third quarter were down 3.9%, while total ex-Finance revenues were down 1.1%.
Even the once-mighty Tech sector had barely positive earnings growth in the third quarter (up only 0.5%), while Finance and Construction were the only sectors with double-digit earnings growth. In total, half of the 16 Zacks sectors had negative earnings comparisons in the third quarter. In the fourth quarter, a total of 9 sectors will have negative earnings growth, with Tech sector earnings expected to be down 4.6% from the same period last year.
Basic Materials is expected to see 12.2% earnings growth in the fourth quarter, which will reverse a negative earnings growth over the preceding four quarters. Hard to envision such a material turnaround in an economically sensitive sector, but it’s mostly a function of easy comparisons for companies in this group.
The market’s focus will remain on the unresolved ‘Fiscal Cliff’ issue, but we do have a number of top-tier economic reports on deck, including the November Housing Starts report on Wednesday, Existing Home Sales on Thursday, and the Personal Income & Outlays and Durable Goods reports on Friday.
Sheraz Mian is the Director of Research for Zacks.com.
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Since 1988, the Zacks Rank has proven that "Earnings estimate revisions are the most powerful force impacting stock prices." Since inception in 1988, #1 Rank Stocks have generated an average annual return of +28%. During the 2000-2002 bear market, Zacks #1 Rank stocks gained +43.8%, while the S&P 500 tumbled -37.6%. Also note that the Zacks Rank system has just as many Strong Sell recommendations (Rank #5) as Strong Buy recommendations (Rank #1). Since 1988, Zacks Rank #5 stocks have significantly underperformed the S&P 500 (+3% versus +10%). Thus, the Zacks Rank system allows investors to truly manage portfolio trading effectively.
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Contact: Sheraz Mian