Zacks Earnings Preview: Disney, News Corp., Priceline, Whole Foods and Groupon

For Immediate Release

Chicago, IL May 6, 2013– Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Disney ( DIS - Analyst Report ) , News Corp. ( NWSA - Analyst Report ) , Priceline ( PCLN - Analyst Report ) , Whole Foods ( WFM - Analyst Report ) , Groupon ( GRPN - Snapshot Report ) .

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Q1 Earnings Season in Final Stretch

We still have plenty of Q1 earnings reports to come, but the bulk of the earnings season is now behind us, with results from 405 S&P 500 companies already out as of Friday, May 3rd. The Retail sector is the only one where more than half of the sector’s total market capitalization has yet to report Q1 results.

For the remaining sectors, the reporting season has ended for 3 – Autos, Construction and Aerospace. For 6 of the 16 Zacks sectors, we have Q1 results for 95% or more of the sector’s total market cap.

This week is the last major reporting week of the Q1 earnings season, with results from 625 companies, including 46 S&P 500 members. This includes industry leaders like Disney ( DIS - Analyst Report ) , News Corp. ( NWSA - Analyst Report ) , Priceline ( PCLN - Analyst Report ) , Whole Foods ( WFM - Analyst Report ) , Groupon ( GRPN - Snapshot Report ) and many others. By the end of this week, we will have Q1 earnings reports from 451 S&P 500 companies. The Retail sector will be the only group by the end of the week that will have more than half of its Q4 results still awaited (retailers typically have fiscal Q4 period-ends in January).

We continue to grade the Q1 earnings season as between ‘average’ and ‘below average’ – it’s definitely neither ‘good’ nor ‘bad.’ This isn’t materially different from what we have been seeing over the last few earnings seasons. What this means is that about two-thirds of the companies beat earnings expectations, but growth is essentially non-existent. A key difference relative to 2012 Q4 earnings season is the very low level of positive revenue surprises.

The Q1 Earnings Scorecard

Here is the summary scorecard for the 405 S&P 500 companies that have reported Q1 results, as of Friday May 3, 2013:

Total earnings for the 405 companies are up +2.9%, with 67.2% of the companies beating earnings expectations with a median surprise of +3.3%. Revenues are down -1.3%, with only 40.7% of the companies coming ahead of top-line expectations, with a median surprise of (negative) -0.4%.

The earnings growth rate and ‘beat ratio’ for these 407 are comparable to what these same companies reported in 2012 Q4 and the last few quarters. But the revenue growth rate and ‘beat ratio’ is lower, with the beat ratio particularly weak in the current period.

In addition to the revenue weakness, another notable aspect of the Q1 earnings season has been the soft Technology results. The sector’s growth rates and ‘beat ratios’ are weaker than those for the S&P 500 as well as the group reported in 2012 Q4. With 83.4% of the sector’s total market capitalization already out with Q1 results, total earnings for the sector are down 5.2%, with 58% of the sector companies beating earnings expectations (vs. the S&P 500 average of 67.2%). The revenue side for the sector isn’t that bad (up +4.3%), which goes on to spotlight the sector’s margin problems.

The aggregate earnings picture for the 97 S&P 500 reports still to come is for an earnings decline of -2.8%, which compares to +2.1% earnings growth for the same group of companies in the preceding quarter. The composite growth rate for Q1, where we combine the results of the 405 companies that are out with the 97 still to come, is for a rise of +1.7% in total earnings on -1% lower revenues. In terms of dollar earnings levels, composite earnings in Q1 total $249.9 billion, a new quarterly record, surpassing the prior high mark of $245.8 billion in Q1 2012. This will be the highest quarterly total since the current earnings cycle started back in 2009 (is that why the market is at a new all-time high as well?).

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