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Costco, AutoZone, Salesforce and Dollar General are part of Zacks Earnings Preview
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For Immediate Release
Chicago, IL – May 26,2020 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes from Costco (COST - Free Report) , AutoZone (AZO - Free Report) , Salesforce (CRM - Free Report) and Dollar General (DG - Free Report) .
Looking Ahead to Coronavirus-Damaged Q2 Earnings Season
The Covid-19 pandemic put an abrupt stop to the impressive earnings growth cycle that got underway in 2010 and took corporate profitability into record territory. This earnings cycle got a huge boost from the tax reform legislation that gave us outsized gains in 2018. Earnings growth was essentially flat last year (2019), but for companies to sustain profitability levels at the record 2018 level in a maturing cycle with all the attendant margin pressures was no small achievement.
In the pre-Covid world, the expectation was for earnings growth to resume in 2020 and continue into next year. But then the pandemic arrived and those expectations adjusted, as the evolving earnings growth picture for 2020 shows.
The bulk of the earnings pain this year is expected to take place in the current period (2020 Q2) and estimates for the June quarter have taken a severe hit.
Earnings growth is expected to remain negative in Q3 and Q4 as well, but the pace of declines is expected to decelerate.
This decelerating decline rate makes sense as the economy has started to reopen already, which should help the growth picture to some extent. Keep in mind that this earnings outlook mirrors the market’s outlook for the economy, which in turn reflects how the pandemic is expected to unfold going forward.
These growth estimates are the bottom up consensus estimates aggregated to the S&P 500 index level.
All forecasts are uncertain, but these are even more uncertain given their dependence on a certain path forward for the pandemic. In any case, this what the market is pricing in at this stage.
Growth is expected to resume next year, with full-year 2021 earnings for the S&P 500 index currently expected to be up +26.4% relative to the still-declining 2020 estimates. The chart below shows the earnings growth picture on an annual basis.
As strong as next year’s growth estimate is, total index earnings would still haven’t gotten back to pre-Covid levels. In other words, S&P 500 earnings in 20201 are currently expected to be modestly below the 2019 level.
These numbers translate to an index ‘EPS’ of $156.12 in 2021 vs. $123.47 in 2020 and $161.26 in 2019.
Q1 Earnings Season Scorecard
As of Friday, May 22, we have seen Q1 results from 479 S&P 500 members or 95.8% of the index’s total membership. Total earnings or aggregate net income for these 479 index members are down -12.7% from the same period last year on +1.3% higher revenues, with 66.4% beating EPS and 58% beating revenue estimates.
We have another 13 S&P 500 members on deck to report results this week. This week’s docket includes results from Costco, AutoZone, Salesforce, Dollar General and others. Please note that the Costco and AutoZone reports will be for those companies’ fiscal quarters ending in May, which we count as part of our June-quarter tally.
In other words, the Q2 earnings cycle will get underway this week even though we haven’t closed the books on the Q1 reporting season yet.
As we have been pointing out all along, Q1 results show the opposing effects that the two largest sectors in the S&P 500 index are having on the aggregate growth picture. These two largest sectors are Finance and Technology, with Finance dragging it down and Technology pushing it higher.
Had it not been for the Finance sector drag, Q1 earnings growth would have been a lot better, thanks primarily to the Technology sector results.
Excluding the Finance sector, whose Q1 earnings are down -33.1% on +2.4% higher revenues, earnings for the rest of S&P 500 companies would be down only -6.4% (vs. down -12.7% with Finance).
Excluding the Technology sector results, whose Q1 earnings are up +5.1% on +4.6% higher revenues, earnings for the rest of S&P 500 companies would be down -17.7% (vs. down -12.7% with Technology).
The earnings growth comparisons start looking a lot better when seen on an ex-Finance basis.
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
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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Costco, AutoZone, Salesforce and Dollar General are part of Zacks Earnings Preview
For Immediate Release
Chicago, IL – May 26,2020 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes from Costco (COST - Free Report) , AutoZone (AZO - Free Report) , Salesforce (CRM - Free Report) and Dollar General (DG - Free Report) .
Looking Ahead to Coronavirus-Damaged Q2 Earnings Season
The Covid-19 pandemic put an abrupt stop to the impressive earnings growth cycle that got underway in 2010 and took corporate profitability into record territory. This earnings cycle got a huge boost from the tax reform legislation that gave us outsized gains in 2018. Earnings growth was essentially flat last year (2019), but for companies to sustain profitability levels at the record 2018 level in a maturing cycle with all the attendant margin pressures was no small achievement.
In the pre-Covid world, the expectation was for earnings growth to resume in 2020 and continue into next year. But then the pandemic arrived and those expectations adjusted, as the evolving earnings growth picture for 2020 shows.
The bulk of the earnings pain this year is expected to take place in the current period (2020 Q2) and estimates for the June quarter have taken a severe hit.
Earnings growth is expected to remain negative in Q3 and Q4 as well, but the pace of declines is expected to decelerate.
This decelerating decline rate makes sense as the economy has started to reopen already, which should help the growth picture to some extent. Keep in mind that this earnings outlook mirrors the market’s outlook for the economy, which in turn reflects how the pandemic is expected to unfold going forward.
These growth estimates are the bottom up consensus estimates aggregated to the S&P 500 index level.
All forecasts are uncertain, but these are even more uncertain given their dependence on a certain path forward for the pandemic. In any case, this what the market is pricing in at this stage.
Growth is expected to resume next year, with full-year 2021 earnings for the S&P 500 index currently expected to be up +26.4% relative to the still-declining 2020 estimates. The chart below shows the earnings growth picture on an annual basis.
As strong as next year’s growth estimate is, total index earnings would still haven’t gotten back to pre-Covid levels. In other words, S&P 500 earnings in 20201 are currently expected to be modestly below the 2019 level.
These numbers translate to an index ‘EPS’ of $156.12 in 2021 vs. $123.47 in 2020 and $161.26 in 2019.
Q1 Earnings Season Scorecard
As of Friday, May 22, we have seen Q1 results from 479 S&P 500 members or 95.8% of the index’s total membership. Total earnings or aggregate net income for these 479 index members are down -12.7% from the same period last year on +1.3% higher revenues, with 66.4% beating EPS and 58% beating revenue estimates.
We have another 13 S&P 500 members on deck to report results this week. This week’s docket includes results from Costco, AutoZone, Salesforce, Dollar General and others. Please note that the Costco and AutoZone reports will be for those companies’ fiscal quarters ending in May, which we count as part of our June-quarter tally.
In other words, the Q2 earnings cycle will get underway this week even though we haven’t closed the books on the Q1 reporting season yet.
As we have been pointing out all along, Q1 results show the opposing effects that the two largest sectors in the S&P 500 index are having on the aggregate growth picture. These two largest sectors are Finance and Technology, with Finance dragging it down and Technology pushing it higher.
Had it not been for the Finance sector drag, Q1 earnings growth would have been a lot better, thanks primarily to the Technology sector results.
The earnings growth comparisons start looking a lot better when seen on an ex-Finance basis.
For an in-depth look at the overall earnings picture and expectations for the coming quarters, please check out our weekly Earnings Trends report >>>> Covid-19 Impact on Earnings to Linger Through 2021
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>
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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.