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.
The Q1 earnings report from Netflix (NFLX - Free Report) is instructive of how the market deals with disappointments from high-flyers. But the streaming giant’s fall from grace is likely another example of Covid winners failing to adjust to the new realities on the ground.
That said, Netflix is hardly alone in failing to see what lay ahead. Baker Hughes (BKR - Free Report) and Halliburton (HAL - Free Report) from the red-hot oil patch became the latest major players to miss consensus estimates. If there is one recurring theme at this admittedly early stage in the 2022 Q1 reporting cycle, it is companies’ inability to beat consensus estimates.
You can see this in the EPS and revenue beats percentages for the 61 S&P 500 members that have reported Q1 results already:
Image Source: Zacks Investment Research
This could change as we get into the heart of the Q1 earnings season. But if it is an early sign of things to come, then it is likely reflective of the collective inability of management teams and analysts to fully grasp the impact of inflation and logistical bottlenecks. We have seen plenty of references to these headwinds from the companies that have already reported for the quarter.
Looking at Q1 as a whole, total S&P 500 earnings are expected to be up +3.4% on +9.9% higher revenues. This is a significant deceleration from what we have been seeing in the preceding quarters, as you can see in the chart below that provides a big-picture view of earnings on a quarterly basis:
Image Source: Zacks Investment Research
The chart below shows the overall earnings picture on an annual basis, with the growth momentum expected to continue:
Image Source: Zacks Investment Research
Looking at the revisions trend in the aggregate, estimates are still going up, though only modestly so. There are plenty of cross-currents once we look at the revisions trend at the granular level, with rising estimates in a few sectors offsetting estimate cuts in others.
Energy sector estimates had been going up as a result of rising oil prices — even before the Ukraine situation — and we can see this within all the major players in the sector. The significant estimate cuts to the Transportation sector, including air carriers and truckers, represent the flip side of what’s happening to the Energy sector estimates.
There is a rising degree of uncertainty about the outlook, being driven by a lack of macroeconomic visibility as reflected in the Treasury yield curve that is at risk of inversion.
The Ukraine situation appears to be exacerbating pre-existing supply-chain issues, which combined with its impact on oil prices, is weighing on the inflation situation in hard-to-predict ways. The evolving earnings revisions trend will reflect this macro backdrop.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Positive Surprises at Covid Lows
The Q1 earnings report from Netflix (NFLX - Free Report) is instructive of how the market deals with disappointments from high-flyers. But the streaming giant’s fall from grace is likely another example of Covid winners failing to adjust to the new realities on the ground.
That said, Netflix is hardly alone in failing to see what lay ahead. Baker Hughes (BKR - Free Report) and Halliburton (HAL - Free Report) from the red-hot oil patch became the latest major players to miss consensus estimates. If there is one recurring theme at this admittedly early stage in the 2022 Q1 reporting cycle, it is companies’ inability to beat consensus estimates.
You can see this in the EPS and revenue beats percentages for the 61 S&P 500 members that have reported Q1 results already:
Image Source: Zacks Investment Research
This could change as we get into the heart of the Q1 earnings season. But if it is an early sign of things to come, then it is likely reflective of the collective inability of management teams and analysts to fully grasp the impact of inflation and logistical bottlenecks. We have seen plenty of references to these headwinds from the companies that have already reported for the quarter.
Looking at Q1 as a whole, total S&P 500 earnings are expected to be up +3.4% on +9.9% higher revenues. This is a significant deceleration from what we have been seeing in the preceding quarters, as you can see in the chart below that provides a big-picture view of earnings on a quarterly basis:
Image Source: Zacks Investment Research
The chart below shows the overall earnings picture on an annual basis, with the growth momentum expected to continue:
Image Source: Zacks Investment Research
Looking at the revisions trend in the aggregate, estimates are still going up, though only modestly so. There are plenty of cross-currents once we look at the revisions trend at the granular level, with rising estimates in a few sectors offsetting estimate cuts in others.
Energy sector estimates had been going up as a result of rising oil prices — even before the Ukraine situation — and we can see this within all the major players in the sector. The significant estimate cuts to the Transportation sector, including air carriers and truckers, represent the flip side of what’s happening to the Energy sector estimates.
There is a rising degree of uncertainty about the outlook, being driven by a lack of macroeconomic visibility as reflected in the Treasury yield curve that is at risk of inversion.
The Ukraine situation appears to be exacerbating pre-existing supply-chain issues, which combined with its impact on oil prices, is weighing on the inflation situation in hard-to-predict ways. The evolving earnings revisions trend will reflect this macro backdrop.