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The 16 S&P 500 members that have reported quarterly results over the last two weeks for their fiscal August-ending quarter form part of our Q3 earnings season tally. We have another 20 companies on deck to report results this week, including 7 S&P 500 members. These early reporters include such industry leaders as Nike (NKE - Free Report) , FedEx (FDX - Free Report) , Oracle (ORCL - Free Report) and others. As such, the Q3 earnings season has gotten underway already, but the market will start paying attention to the reporting cycle the week of October 9th when the big banks start coming out with quarterly results.
The chart below shows the weekly reporting calendar for the S&P 500 index, with the earnings season really ramping up in about two weeks.
This week’s notable earnings reports include:
Lennar (LEN - Free Report) – Lennar shares are expected to report results before the market’s open on Tuesday, October 3rd, with the homebuilder expected to earn $1.01 per share on $3.22 billion in revenues. Earnings per share for the quarter will be unchanged from the year-earlier period though revenues would be up +13.6% from the same period last year.
This Miami, Florida-based homebuilder has been literally in the eye of the storm lately, and the impact showed up in its mid-September pre-announcement. As a result, estimates have come down recently, though most of the negative revisions pertain to the coming quarter (hurricane impact) while estimates for 2018 have been trending up.
Lennar shares have been strong performers this year, with the stock up +21.6% in the year-to-date period vs. the +13.5% gain for the Zacks Construction sector and the +12.1% gain for the S&P 500 index. We should keep in mind, however, that all of the stock’s gain this year had taken place through early March, with the stock essentially flat since then.
Pepsi (PEP - Free Report) – Pepsi reports quarterly results before the market’s open on Wednesday, October 4th, with the company expected to earn $1.42 per share on $16.4 billion in revenues, representing year-over-year gains of +1.5% and +2.4%, respectively.
The stock has been struggling since mid-August and is currently up +6.5% for the year, underperforming Coke’s (KO - Free Report) +8.5% gain and the S&P 500’s +12.1% gain. Weakness in the company’s international business, particularly the Asia, Middle East & North Africa (AMENA) segment has been a drag in recent quarters, offsetting continued momentum in the Frito Lay North America business.
The carbonated beverage business has been struggling over the last couple of years, an issue that Pepsi shares with Coke, but the stock’s near-term momentum will reflect results from the international business and management’s commentary about the outlook.
Costco (COST - Free Report) – Costco reports results after the market’s close on Thursday, October 5th, with the retail giant expected to post $2.01 in EPS on $41.7 billion in revenues, up +13.8% and +14.2% from the year-earlier level, respectively. The revisions trend has been positive, with the current consensus EPS estimate for the quarter modestly up since the start of the period.
The stock has been on an uncharacteristic rollercoaster ride this year and down big since mid-June following the Amazon – Whole Foods deal. The stock is currently up +3% this year, underperforming the broader market (up +12.1%) as well Wal-Mart (WMT - Free Report) – up +13.5%).
Other notable companies this week include Constellation Brands (STZ - Free Report) and Yum China (YUMC - Free Report) .
Expectations for Q3
Total Q3 earnings are expected to be up +3.2% from the same period last year on +5% higher revenues. This would follow +11.1% earnings growth in 2017 Q2 on +5.5%, the second quarter in a row of double-digit earnings growth.
Estimates for Q3 came down as the quarter unfolded, with the current +3.2% growth down from +6.3% at the end of June. The chart below shows how Q3 earnings growth expectations have evolved since the start of the quarter.
Please note that while Q3 estimates have followed the well traversed path that we have been seeing consistently over the last few years, the magnitude of negative revisions nevertheless compares favorably to other periods. In other words, Q3 estimates have come down, but they haven’t come down by as much.
The table below shows the summary picture for Q3, contrasted with what was actually achieved in Q2.
In terms of sector focus, the strongest growth in Q3 is coming from the Energy sector which benefits from easy comparisons. Excluding the Energy sector, the aggregate growth pace drops to +1.4% from +3.2%. The Construction and Conglomerates sectors are the only other sectors with double-digit growth rates. Earnings growth is also strong for the Technology sector, with total earnings for the sector expected to be up +9.7% on +6.7% higher revenues.
On the negative side, Q3 earnings are expected to be below the year-earlier level for 7 of the 16 Zacks sectors, with double-digit declines for the Transportation, Aerospace, Basic Materials and Autos sectors.
The chart below shows Q3 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, the growth pace has started decelerating from the double-digit level of the first two quarters 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.
Here is a list of the 20 companies including 7 S&P 500 and reporting this week.
Company
Ticker
Current Qtr
Year-Ago Qtr
Last EPS Surprise %
Report Day
Time
CAL-MAINE FOODS
CALM
-0.27
-0.64
-43.75%
Monday
BTO
FERGUSON PLC
FERGY
N/A
N/A
N/A
Tuesday
N/A
PAYCHEX INC
PAYX
0.6
0.6
1.89%
Tuesday
BTO
LENNAR CORP -A
LEN
1.01
1.01
16.67%
Tuesday
BTO
PARK ELECTROCHE
PKE
0.11
0.1
-7.69%
Tuesday
BTO
AZZ INC
AZZ
0.41
0.55
-16.39%
Tuesday
BTO
NOVAGOLD RSRCS
NG
-0.03
-0.02
0.00%
Tuesday
AMC
PEPSICO INC
PEP
1.42
1.4
7.91%
Wednesday
BTO
MONSANTO CO-NEW
MON
-0.38
0.07
10.92%
Wednesday
BTO
ACUITY BRANDS
AYI
2.3
2.09
5.73%
Wednesday
BTO
LAMB WESTON HLD
LW
0.5
N/A
6.25%
Wednesday
BTO
RPM INTL INC
RPM
0.84
0.83
-12.82%
Wednesday
BTO
8POINT3 ENERGY
CAFD
0.65
0.38
-25.00%
Wednesday
AMC
RESOURCES CNCTN
RECN
0.12
0.15
-9.09%
Wednesday
AMC
CONSTELLATN BRD
STZ
2.16
1.77
18.18%
Thursday
BTO
INTL SPEEDWAY
ISCA
0.05
0.03
-6.25%
Thursday
BTO
COSTCO WHOLE CP
COST
2.01
1.77
6.87%
Thursday
AMC
YUM CHINA HLDGS
YUMC
0.55
N/A
12.50%
Thursday
AMC
HELEN OF TROY
HELE
1.3
1.22
13.27%
Thursday
AMC
TRILOGY METALS
TMQ
-0.02
-0.04
0.00%
Thursday
AMC
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Handicapping the Q3 Earnings Season
The 16 S&P 500 members that have reported quarterly results over the last two weeks for their fiscal August-ending quarter form part of our Q3 earnings season tally. We have another 20 companies on deck to report results this week, including 7 S&P 500 members. These early reporters include such industry leaders as Nike (NKE - Free Report) , FedEx (FDX - Free Report) , Oracle (ORCL - Free Report) and others. As such, the Q3 earnings season has gotten underway already, but the market will start paying attention to the reporting cycle the week of October 9th when the big banks start coming out with quarterly results.
The chart below shows the weekly reporting calendar for the S&P 500 index, with the earnings season really ramping up in about two weeks.
This week’s notable earnings reports include:
Lennar (LEN - Free Report) – Lennar shares are expected to report results before the market’s open on Tuesday, October 3rd, with the homebuilder expected to earn $1.01 per share on $3.22 billion in revenues. Earnings per share for the quarter will be unchanged from the year-earlier period though revenues would be up +13.6% from the same period last year.
This Miami, Florida-based homebuilder has been literally in the eye of the storm lately, and the impact showed up in its mid-September pre-announcement. As a result, estimates have come down recently, though most of the negative revisions pertain to the coming quarter (hurricane impact) while estimates for 2018 have been trending up.
Lennar shares have been strong performers this year, with the stock up +21.6% in the year-to-date period vs. the +13.5% gain for the Zacks Construction sector and the +12.1% gain for the S&P 500 index. We should keep in mind, however, that all of the stock’s gain this year had taken place through early March, with the stock essentially flat since then.
Pepsi (PEP - Free Report) – Pepsi reports quarterly results before the market’s open on Wednesday, October 4th, with the company expected to earn $1.42 per share on $16.4 billion in revenues, representing year-over-year gains of +1.5% and +2.4%, respectively.
The stock has been struggling since mid-August and is currently up +6.5% for the year, underperforming Coke’s (KO - Free Report) +8.5% gain and the S&P 500’s +12.1% gain. Weakness in the company’s international business, particularly the Asia, Middle East & North Africa (AMENA) segment has been a drag in recent quarters, offsetting continued momentum in the Frito Lay North America business.
The carbonated beverage business has been struggling over the last couple of years, an issue that Pepsi shares with Coke, but the stock’s near-term momentum will reflect results from the international business and management’s commentary about the outlook.
Costco (COST - Free Report) – Costco reports results after the market’s close on Thursday, October 5th, with the retail giant expected to post $2.01 in EPS on $41.7 billion in revenues, up +13.8% and +14.2% from the year-earlier level, respectively. The revisions trend has been positive, with the current consensus EPS estimate for the quarter modestly up since the start of the period.
The stock has been on an uncharacteristic rollercoaster ride this year and down big since mid-June following the Amazon – Whole Foods deal. The stock is currently up +3% this year, underperforming the broader market (up +12.1%) as well Wal-Mart (WMT - Free Report) – up +13.5%).
Other notable companies this week include Constellation Brands (STZ - Free Report) and Yum China (YUMC - Free Report) .
Expectations for Q3
Total Q3 earnings are expected to be up +3.2% from the same period last year on +5% higher revenues. This would follow +11.1% earnings growth in 2017 Q2 on +5.5%, the second quarter in a row of double-digit earnings growth.
Estimates for Q3 came down as the quarter unfolded, with the current +3.2% growth down from +6.3% at the end of June. The chart below shows how Q3 earnings growth expectations have evolved since the start of the quarter.
Please note that while Q3 estimates have followed the well traversed path that we have been seeing consistently over the last few years, the magnitude of negative revisions nevertheless compares favorably to other periods. In other words, Q3 estimates have come down, but they haven’t come down by as much.
The table below shows the summary picture for Q3, contrasted with what was actually achieved in Q2.
In terms of sector focus, the strongest growth in Q3 is coming from the Energy sector which benefits from easy comparisons. Excluding the Energy sector, the aggregate growth pace drops to +1.4% from +3.2%. The Construction and Conglomerates sectors are the only other sectors with double-digit growth rates. Earnings growth is also strong for the Technology sector, with total earnings for the sector expected to be up +9.7% on +6.7% higher revenues.
On the negative side, Q3 earnings are expected to be below the year-earlier level for 7 of the 16 Zacks sectors, with double-digit declines for the Transportation, Aerospace, Basic Materials and Autos sectors.
The chart below shows Q3 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, the growth pace has started decelerating from the double-digit level of the first two quarters 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.
Here is a list of the 20 companies including 7 S&P 500 and reporting this week.