We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
There aren’t that many large-cap earnings reports still to come, but plenty of small-cap companies have yet to report Q2 results. At this stage, Q2 results are awaited from only 9 S&P 500 index members, though the number of companies from the small-cap S&P 600 index yet to report results is 131.
We have 67 companies on deck to report results this week, including 7 S&P 500 members and 17 S&P 600 members. Best Buy (BBY - Free Report) , Lululemon Athletica (LULU - Free Report) and H&R Block (HRB - Free Report) are some of the notable companies reporting quarterly results this week.
The earnings focus lately has been on the Retail sector where only 3 companies in the S&P 500 are still to report results. Total Q2 earnings for the Retail sector in the S&P 500 index are up +0.3% from the same period last year on +4.6% higher revenues, with 75.7% beating EPS estimates and 81.1% beating revenue estimates.
Please note that we have a stand-alone Retail sector, unlike the official Standard & Poor’s placement of this space in the Consumer Discretionary sector. The Zacks Retail sector includes, besides the traditional department stores and other brick-and-mortar retailers, the online vendors like Amazon and Priceline and restaurant operators. Results from the online vendors and most of the restaurant operators typically come out in the first phase of each reporting cycle.
The side-by-side charts below compare the sector’s results thus far with what we have seen from the same group of 37 retailers in other recent periods.
The aggregate growth pace from the 37 retailers that have reported results already are tracking below what we had seen from the same companies in other recent periods. A big contributor to the weak earnings growth showing this quarter is the -77% drop in Amazon’s earnings on +24.8% higher revenues. Excluding the Amazon drag, Q2 earnings for the sector would be up +3.9% on +3% higher revenues. This ex-Amazon growth picture compares relatively favorably with historical periods, as the chart below shows.
Unlike growth, positive surprises are as numerous in this sector as they have been all along in other sectors this earnings season. In fact, the proportion of retailers beating revenue estimates is the third highest of all 16 Zacks sectors in Q2 at 81.1%, behind only the Conglomerates (83.3%) Technology (86.4%) sectors.
Scorecard for the Small-Cap Retailers
The Retail sector has a shade more earnings weight in the small-cap S&P 600 index than is the case with the large-cap S&P 500 index. The sector accounted for 9.2% of the small-cap index’s total earnings over the last four quarters, with its earnings contribution to the large-cap index over the comparable period is 7.2%.
For the S&P 600 index, we now have Q2 results from 35 of the 54 retailers in the index. Total earnings for these small-cap retailers are down -13.5% from the same period last year on +1.8% higher revenues, with 60% beating EPS estimates and 51.4% beating revenue estimates. The comparison charts below put these small-cap Q2 results in a historical context.
Q2 Earnings Season Scorecard (as of Friday, August 25, 2017)
The Q2 earnings season has come to an end for 11 of the 16 Zacks sectors, with results from 491 S&P 500 members or 98.2% of the index’s total membership already out. Total earnings for these companies are up +11.2% from the same period last year on +5.6% higher revenues, with 74.3% beating EPS estimates and 68.4% beating revenue estimates.
The table below shows the current Q2 Scorecard
The charts below compare the Q2 results thus far from the 491 index members with what we had seen from the same group of companies in other recent periods.
As pointed out earlier, the proportion of companies beating revenue estimates is tracking above historical periods (right-hand chart). The earnings and revenue growth pace for these 491 companies is below what we had seen from the same sample of companies in Q1, but an improvement over other recent periods.
Here are the four takeaways from the Q2 earnings season.
First, the earnings and revenue growth pace has steadily gone up relative to pre-season expectations. Total Q2 earnings for the index are currently expected to be up +11% from the same period last year on +5.5% higher revenues.
Please note that the +11% growth rate is the blended growth rate; it combines the actual growth for the 491 S&P 500 members that have reported with estimates for the still-to-come 9 index members. At the start of the quarter, the expectation was for earnings growth of +7.9%, which came down as the quarter unfolded, reaching as low as +5.6% just ahead of the start of the reporting season.
The deceleration in Q2 earnings growth notwithstanding, the quarter’s earnings tally is on track to reach a new all-time quarterly record, surpassing the 2016 Q4 level, as you can see in the chart below. The chart below contrasts the estimated 2017 Q2 total of $294.7 billion with the actual earnings for the preceding four quarters and estimates for the following four periods.
This record isn’t expected to last very long, with each of the coming quarters expected to bring in ever bigger earnings tallies.
Second, an above-average proportion of companies are beating estimates, particularly revenue estimates. We typically don’t give this factor a lot of weight in evaluating or assessing an earnings season since we all know that management teams are experts in managing expectations. Even then, the trend emerging in the Q2 earnings season is noteworthy for two reasons. First, estimates for the quarter had not fallen by as much as had historically been the case. Second, the proportion of positive revenue surprises, a much harder variable to manipulate relative to earnings, is really off the chart.
Third, Q2 growth is broad-based and not dependent on one or two sectors. There is strong growth contribution from the Finance, Technology and Energy sectors in Q2, but we have 14 of the 16 Zacks sectors on track to produce more earnings than the year-earlier period.
Fourth, estimates for the September quarter have started coming down, but the pace and magnitude of negative revisions compares favorably to other comparable periods. Total Q3 earnings are currently expected to be up +3.9% from the same period last year, down from +6.3% at the start of July. The chart below shows the evolution of Q3 growth expectations since the start of the period.
This is a reassuring start on the revisions front, but we will have to see if this trend will remain in place through the rest of this earnings season.
The chart below shoes Q2 earnings growth expectations 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, this growth pace is expected to continue through the rest of the year.
Note: Sheraz Mian manages the Zacks equity research department. He is an acknowledged earnings expert whose commentaries and analyses appear on Zacks.com and in the print and electronic media. His weekly earnings related articles include Earnings Trends and Earnings Preview. He manages the Zacks Top 10 and Focus List portfolios and writes the Weekly Market Analysis article for Zacks Premium subscribers.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaries," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Plenty of Small-Cap Earnings Still to come
There aren’t that many large-cap earnings reports still to come, but plenty of small-cap companies have yet to report Q2 results. At this stage, Q2 results are awaited from only 9 S&P 500 index members, though the number of companies from the small-cap S&P 600 index yet to report results is 131.
We have 67 companies on deck to report results this week, including 7 S&P 500 members and 17 S&P 600 members. Best Buy (BBY - Free Report) , Lululemon Athletica (LULU - Free Report) and H&R Block (HRB - Free Report) are some of the notable companies reporting quarterly results this week.
The earnings focus lately has been on the Retail sector where only 3 companies in the S&P 500 are still to report results. Total Q2 earnings for the Retail sector in the S&P 500 index are up +0.3% from the same period last year on +4.6% higher revenues, with 75.7% beating EPS estimates and 81.1% beating revenue estimates.
Please note that we have a stand-alone Retail sector, unlike the official Standard & Poor’s placement of this space in the Consumer Discretionary sector. The Zacks Retail sector includes, besides the traditional department stores and other brick-and-mortar retailers, the online vendors like Amazon and Priceline and restaurant operators. Results from the online vendors and most of the restaurant operators typically come out in the first phase of each reporting cycle.
The side-by-side charts below compare the sector’s results thus far with what we have seen from the same group of 37 retailers in other recent periods.
The aggregate growth pace from the 37 retailers that have reported results already are tracking below what we had seen from the same companies in other recent periods. A big contributor to the weak earnings growth showing this quarter is the -77% drop in Amazon’s earnings on +24.8% higher revenues. Excluding the Amazon drag, Q2 earnings for the sector would be up +3.9% on +3% higher revenues. This ex-Amazon growth picture compares relatively favorably with historical periods, as the chart below shows.
Unlike growth, positive surprises are as numerous in this sector as they have been all along in other sectors this earnings season. In fact, the proportion of retailers beating revenue estimates is the third highest of all 16 Zacks sectors in Q2 at 81.1%, behind only the Conglomerates (83.3%) Technology (86.4%) sectors.
Scorecard for the Small-Cap Retailers
The Retail sector has a shade more earnings weight in the small-cap S&P 600 index than is the case with the large-cap S&P 500 index. The sector accounted for 9.2% of the small-cap index’s total earnings over the last four quarters, with its earnings contribution to the large-cap index over the comparable period is 7.2%.
For the S&P 600 index, we now have Q2 results from 35 of the 54 retailers in the index. Total earnings for these small-cap retailers are down -13.5% from the same period last year on +1.8% higher revenues, with 60% beating EPS estimates and 51.4% beating revenue estimates. The comparison charts below put these small-cap Q2 results in a historical context.
Q2 Earnings Season Scorecard (as of Friday, August 25, 2017)
The Q2 earnings season has come to an end for 11 of the 16 Zacks sectors, with results from 491 S&P 500 members or 98.2% of the index’s total membership already out. Total earnings for these companies are up +11.2% from the same period last year on +5.6% higher revenues, with 74.3% beating EPS estimates and 68.4% beating revenue estimates.
The table below shows the current Q2 Scorecard
The charts below compare the Q2 results thus far from the 491 index members with what we had seen from the same group of companies in other recent periods.
As pointed out earlier, the proportion of companies beating revenue estimates is tracking above historical periods (right-hand chart). The earnings and revenue growth pace for these 491 companies is below what we had seen from the same sample of companies in Q1, but an improvement over other recent periods.
Here are the four takeaways from the Q2 earnings season.
First, the earnings and revenue growth pace has steadily gone up relative to pre-season expectations. Total Q2 earnings for the index are currently expected to be up +11% from the same period last year on +5.5% higher revenues.
Please note that the +11% growth rate is the blended growth rate; it combines the actual growth for the 491 S&P 500 members that have reported with estimates for the still-to-come 9 index members. At the start of the quarter, the expectation was for earnings growth of +7.9%, which came down as the quarter unfolded, reaching as low as +5.6% just ahead of the start of the reporting season.
The deceleration in Q2 earnings growth notwithstanding, the quarter’s earnings tally is on track to reach a new all-time quarterly record, surpassing the 2016 Q4 level, as you can see in the chart below. The chart below contrasts the estimated 2017 Q2 total of $294.7 billion with the actual earnings for the preceding four quarters and estimates for the following four periods.
This record isn’t expected to last very long, with each of the coming quarters expected to bring in ever bigger earnings tallies.
Second, an above-average proportion of companies are beating estimates, particularly revenue estimates. We typically don’t give this factor a lot of weight in evaluating or assessing an earnings season since we all know that management teams are experts in managing expectations. Even then, the trend emerging in the Q2 earnings season is noteworthy for two reasons. First, estimates for the quarter had not fallen by as much as had historically been the case. Second, the proportion of positive revenue surprises, a much harder variable to manipulate relative to earnings, is really off the chart.
Third, Q2 growth is broad-based and not dependent on one or two sectors. There is strong growth contribution from the Finance, Technology and Energy sectors in Q2, but we have 14 of the 16 Zacks sectors on track to produce more earnings than the year-earlier period.
Fourth, estimates for the September quarter have started coming down, but the pace and magnitude of negative revisions compares favorably to other comparable periods. Total Q3 earnings are currently expected to be up +3.9% from the same period last year, down from +6.3% at the start of July. The chart below shows the evolution of Q3 growth expectations since the start of the period.
This is a reassuring start on the revisions front, but we will have to see if this trend will remain in place through the rest of this earnings season.
The chart below shoes Q2 earnings growth expectations 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, this growth pace is expected to continue through the rest of the year.
Note: Sheraz Mian manages the Zacks equity research department. He is an acknowledged earnings expert whose commentaries and analyses appear on Zacks.com and in the print and electronic media. His weekly earnings related articles include Earnings Trends and Earnings Preview. He manages the Zacks Top 10 and Focus List portfolios and writes the Weekly Market Analysis article for Zacks Premium subscribers.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaries," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>
Here is a list of the 67 companies including 7 S&P 500 and 17 S&P 600 members reporting this week.