We are still a couple of weeks away from the end of the March quarter, but the Q1 earnings season has gotten underway already. The four S&P 500 members that have reported results like
Oracle ( ORCL), Adobe Systems ( ADBE) and others have come out with their February fiscal quarter results, which form part of our Q1 earnings tally. We have another 8 index members reporting results this week, including bellwethers like FedEx ( FDX Quick Quote FDX - Free Report) , Nike ( NKE), and Accenture ( ACN) and others. The Oracle and Adobe reports have been very strong, with both companies showing plenty of momentum in their businesses, which likely helps frame earnings expectations for the Tech sector. This week’s report from Accenture should shed further light on this key sector, the strongest stock price performer in the year-to-date period. These early reports notwithstanding, the reporting cycle doesn’t take the spotlight till about mid-April, as the chart below of reporting calendar for the S&P 500 index clearly shows. This Week’s Key Reports FedEx ( FDX Quick Quote FDX - Free Report) – FedEx reports after the market’s close on Tuesday, March 21st, with the company expected to earn $2.65 per share on $14.98 billion in revenues, up +5.7% and +18% from the year-earlier level, respectively. The company missed expectations in the last earnings report on December 20th, which has weighed on the stock since then. The stock is down -2% since the last earnings report, underperforming the Zacks Transportation sector (up +1.3%) and the S&P 500 (up +4.8%). While FedEx’s surprise history has not been consistent, the stock always responds to the earnings report in a big way. Nike ( NKE) – Nike reports the same day as FedEx after the market’s close on Tuesday, March 21st. The company is expected to earn $0.52 per share on $8.45 billion in revenues, down -4.2% on +5.2% higher revenues from the year-earlier period, respectively. The stock responded positively to the last earnings report on December 20th, but has been a laggard over the past year (down -8.9%) relative to the Consumer Discretionary sector (up +13.8%) and the S&P 500 index (+16%). Competitive challenges from the likes of Under Armour and Adidas and the impact of problems in the retail chain on the company’s inventory situation have been the key issues in the Nike story. We should keep in mind, however, that while the Nike stock has been a laggard over the past year, Under Armour has been an even been bigger laggard. Accenture ( ACN) – Accenture, the tech consulting firm, reports results before the market’s open on Thursday, March 23rd. The company is expected to earn $1.30 per share on $8.34 billion in revenues, down -3% on +5% higher revenues from the year-earlier period, respectively. The stock responds strongly to the earnings report – it was down in response to the last earnings report on December 21st but has done better than the S&P 500 index since the last earnings report. The key significance of the Accenture report is management’s commentary about technology spending trend, which offers read-throughs for IBM (IBM) and broader Technology space. ConAgra ( CAG), General Mills ( GIS) and Micron Technology ( MU) are some of the other notable reports this week. Expectations for Q1 Total Q1 earnings are expected to be up +6.5% from the same period last year on +6.4% higher revenues. This would follow +7.3% earnings growth in 2016 Q4 on +4.7%, the highest growth pace in all most two years. Estimates for Q1 came down as the quarter unfolded, with the current +6.5% growth down from +10.4% at the end of December. The chart below shows how Q1 earnings growth expectations have evolved over the last three months.
Please note that while Q1 estimates have followed well traversed path that we have been seeing consistently over the last few years, the magnitude of negative revisions compares favorably to other periods, particularly in the first half of last year and all of 2015. In other words, Q1 estimates have come down, but they haven’t come down by as much.
The table below shows the summary picture for Q1, contrasted with what was actually achieved in Q4.
Please note that the Q1 earnings season would follow the strong showing on the earnings front in the preceding reporting cycle. Not only did 2016 Q4 growth reach the highest in two years, but total earnings for the quarter also reached a new quarterly record. The strong Q4 performance came after the first positive earnings growth in 2016 Q3, having declined in each of the preceding 5 quarters, as the chart below of year-over-year earnings growth for the S&P 500 index shows.
Expectations Beyond Q1 The chart below shows the Q1 earnings growth contrasted with what is expected in the following three quarters and actual results in the preceding 5 quarters. As you can see in the chart below, the growth pace is expected to ramp up in 2017.
The market is reflecting this improved earnings backdrop as the chart below of the S&P 500 relative to forward 12-month Zacks Consensus estimates shows.
Please note that the earnings backdrop has not changed in any meaningful way since the November elections, notwithstanding the market’s strong gains since then. The only exception to this comment is the Finance sector whose earnings outlook has improved as a result of the uptrend in interest rates since November 8th. It is reasonable to expect that earnings estimates will move favorably once the new administration’s growth-friendly policies get enacted. For now, however, estimates are following the long-established trend of coming down.
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Company Ticker Current Qtr Year-Ago Qtr Last EPS Surprise % Report Day Time ASURE SOFTWARE ASUR 0.1 -0.08 42.86% Monday BTO DESTINATION XL DXLG 0 -0.02 16.67% Monday BTO JAMBA INC JMBA -0.04 -0.28 -20.00% Monday BTO MOVADO GRP INC MOV 0.18 0.4 28.17% Monday BTO SHENANDOAH TELE SHEN -0.21 0.24 -28.57% Monday BTO LENNAR CORP -A LEN 0.56 0.63 5.51% Tuesday BTO GENL MILLS GIS 0.71 0.65 -3.41% Tuesday BTO FRANCESCAS HLDG FRAN 0.37 0.36 44.44% Tuesday BTO COCA-COLA EU PT CCE 0.46 0.53 2.78% Tuesday BTO NEOGEN CORP NEOG 0.27 0.22 3.57% Tuesday BTO CHEETAH MBL-ADR CMCM N/A 0.1 -66.67% Tuesday BTO FIFTH STREET AM FSAM 0.19 0.18 33.33% Tuesday BTO CANADIAN SOLAR CSIQ 0.22 1.05 0.00% Tuesday BTO NIKE INC-B NKE 0.52 0.55 16.28% Tuesday AMC FEDEX CORP FDX 2.65 2.51 -3.78% Tuesday AMC HEALTHEQUITY HQY 0.05 0.05 11.11% Tuesday AMC DULUTH HOLDINGS DLTH 0.33 0.37 57.14% Tuesday AMC STEELCASE INC SCS 0.23 0.22 9.68% Tuesday AMC AAR CORP AIR 0.38 0.26 3.57% Tuesday AMC IMPRIMIS PHARMA IMMY -0.28 -0.53 N/A Tuesday AMC SPARK NETWORKS LOV N/A -0.05 100.00% Tuesday AMC PARNELL PHARMA PARNF -0.08 -0.45 -350.00% Tuesday AMC SILVER WHEATON SLW 0.17 0.14 -13.64% Tuesday AMC ATENTO SA ATTO 0.16 0.31 -13.04% Tuesday AMC PETROBRAS-ADR C PBR 0.18 -0.21 33.33% Tuesday AMC XCEL BRANDS INC XELB 0.04 0.04 -88.89% Tuesday AMC AMEC FOSTER WHL AMFW N/A N/A N/A Tuesday N/A LANDS END INC LE 0.3 0.71 -83.33% Tuesday N/A AMAYA INC AYA 0.6 0.4 10.53% Wednesday BTO ACUSHNET HLDGS GOLF 0.05 N/A -833.33% Wednesday BTO EVINE LIVE INC EVLV 0 0.01 -25.00% Wednesday BTO WINNEBAGO WGO 0.45 0.35 71.43% Wednesday BTO ON TRACK INNOV OTIV 0 -0.03 133.33% Wednesday BTO PERRY ELLIS INT PERY 0.6 0.35 43.75% Wednesday BTO QIWI PLC-ADR QIWI 0.2 0.19 7.41% Wednesday BTO TENCENT HOLDING TCEHY N/A 0.13 N/A Wednesday BTO TECOGEN INC TGEN N/A -0.04 125.00% Wednesday BTO PVH CORP PVH 1.22 1.52 7.88% Wednesday AMC FRANCO NV CP FNV 0.2 0.15 25.00% Wednesday AMC ASCENDIS PHARMA ASND -0.61 -0.54 -14.29% Wednesday AMC HERMAN MILLER MLHR 0.33 0.46 -1.82% Wednesday AMC CENTENNIAL RES CDEV 0.04 N/A N/A Wednesday AMC TRANSATL PETROL TAT -0.01 -0.62 -125.00% Wednesday AMC EHI CAR SERVICE EHIC N/A -0.03 N/A Wednesday AMC FIVE BELOW INC FIVE 0.89 0.77 11.11% Wednesday AMC CK HUTCHISN HLD CKHUY N/A N/A N/A Wednesday N/A KINGFISHER -ADR KGFHY N/A N/A N/A Wednesday N/A CONAGRA BRANDS CAG 0.45 0.68 8.89% Thursday BTO ACCENTURE PLC ACN 1.3 1.34 6.04% Thursday BTO ADV ACCELERATOR AAAP -0.19 -0.1 -100.00% Thursday BTO PIERIS PHARMACT PIRS -0.13 -0.07 -7.69% Thursday BTO COMMERCIAL METL CMC 0.12 0.15 -41.18% Thursday BTO GALMED PHARMA GLMD N/A -0.29 8.11% Thursday BTO CANCER GENETICS CGIX -0.2 -0.48 17.86% Thursday BTO BIOLINE RX LTD BLRX -0.08 -0.07 -14.29% Thursday BTO HANWHA Q CELLS HQCL 0.05 0.33 138.10% Thursday BTO SCHOLASTIC CORP SCHL -0.27 -0.06 3.65% Thursday BTO MICRON TECH MU 0.77 -0.05 16.67% Thursday AMC LONESTAR RESRCS LONE -0.13 N/A -512.50% Thursday AMC CYMABAY THERAPT CBAY -0.3 -0.26 19.35% Thursday AMC BASIC EGY SVCS BAS -1.1 -99.99 6.94% Thursday AMC OXFORD INDS INC OXM 0.91 1.09 22.22% Thursday AMC SHOE CARNIVAL SCVL 0.03 0.21 0.00% Thursday AMC UPLAND SOFTWARE UPLD -0.12 -0.02 141.18% Thursday AMC JAGGED PEAK EGY JAG 0.01 N/A N/A Thursday AMC VERASTEM INC VSTM N/A -0.32 12.50% Thursday AMC NOVABAY PHARMAC NBY -0.12 -1.26 N/A Thursday AMC NEOVASC INC NVCN N/A -0.11 -100.00% Thursday AMC KB HOME KBH 0.15 0.14 8.11% Thursday AMC GAMESTOP CORP GME 2.29 2.4 4.26% Thursday AMC SPORTSMANS WRHS SPWH 0.27 0.27 0.00% Thursday AMC CELYAD-ADR CYAD N/A N/A N/A Thursday N/A KLONDEX MINES KLDX N/A 0.05 33.33% Thursday N/A SANCHEZ PRODUCT SPP -1.17 -19.95 N/A Friday BTO FINISH LINE-CLA FINL 0.71 0.83 -33.33% Friday BTO REX AMERICAN RS REX N/A 0.54 13.33% Friday BTO SMITHS GRP PLC SMGZY N/A N/A N/A Friday N/A