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Earnings Preview

Q3 Earnings Season Ramps Up

The 2014 Q3 reporting season is underway and we have results from 29 S&P 500 members. The reporting pace accelerates this week, with 127 companies announcing third-quarter results, including 52 S&P 500 members. While the Finance sector is heavily represented on this week’s reporting docket, we have enough bellwethers from other sectors to give us a good sense of this earnings season.  

Expectations for the Finance sector remain low, with total earnings for the sector expected to be down -3.8% after the +0.9% growth in the preceding quarter. Tough comparison for Bank of America (BAC) as a result of the bank’s Department of Justice settlement is the primary reason for the Finance sector’s sub-par growth numbers this quarter. But even adjusting for the BAC shortfall, core banking earnings are expected to be essentially flat in the quarter.

We should see some improvement on the capital markets front, with market volatility helping improve trading volumes and advisory services benefiting from increased M&A and IPO transactions. But volumes in the fixed income, currencies and commodities (FICC) business should still remain below year-earlier levels. Hard to tell whether the persistent FICC weakness of the last few years is a function of cyclical forces or a result of the new more restrictive regulatory landscape, but we should see some modest improvement in FICC revenues this quarter.

For more details on the Finance sector earnings, please click here for the Finance Industry Outlook report

Beyond Finance, we have plenty of leaders from other key sectors on deck for releasing results this week as well. From Google (GOOGL - Analyst Report) and Intel (INTC - Analyst Report) to Johnson & Johnson (JNJ - Analyst Report) , General Electric (GE) and CSX Corp (CSX), this week’s reports span the full spectrum of the economy. As such, this week’s reports will give us a good sense of what to expect the rest of this reporting cycle.

Given the largely Finance-centric orientation of this week’s reports, we wouldn’t get that much clarity on the global growth questions that have been dominating the market’s attention lately. But we do have global operators like General Electric (GE), Intel (INTC - Analyst Report) , Honeywell (HON - Analyst Report) , and others on the docket this week that will shed some light on this issue.

Intel shares were down on Friday following the Microchip (MCHP - Analyst Report) pre-announcement, but I suspect that the extent of the read-through may be getting exaggerated in the excitement. There is hardly any doubt about Intel’s leverage to the improving PC demand picture and even expectations of the company’s growing penetration in the tablet and 4G modem markets appear justified. We will know for sure after the company’s release after the close on Tuesday, but I am skeptical of the prevailing anxiety about the company’s outlook, particularly the dire read-throughs post Microchip. Advanced Micro Devices (AMD) and Taiwan Semiconductor (TSM - Snapshot Report) will also be reporting next week and will shed more light on the near-term outlook for the chip space.

Expectations for Q3

The table below shows a summary picture of current Q3 expectations compared to what was actually achieved in Q2. As you can see, total earnings are expected to be up +1.6% from the same period last year on +1.7% higher revenues and modest margin gains. Finance remains a big drag this quarter, with total earnings for the sector expected to be down -3.8% from the same period last year. Excluding Finance, total earnings for the S&P 500 would be up +2.8%.

As has been the trend each quarter ahead of the start of the earnings season, estimates for Q3 have come down as well as the quarter unfolded. The recent leg down in estimates has mostly been due to Bank of America (BAC), with the bank’s settlement with the government causing its Q3 EPS estimates to drop from positive 32 cents to the current 8 cents loss. In dollar terms, that’s a $4.2 billion negative swing in Bank of America’s Q3 earnings estimates.

The chart below shows estimates for 2014 Q3 have evolved over the last 10 or so weeks.


Total earnings for the S&P 500 reached an all-time quarterly record in 2014 Q2 and current estimates for Q3 put the quarterly total as the second highest ever. But given the historical trend of roughly two-thirds of the companies beating earnings estimates, the final Q3 tally will likely be right in the preceding quarter’s record vicinity. The chart below shows that current consensus estimates reflect record tallies in the following quarters.  

For these estimates to hold, we need an improvement on the guidance front, which has been persistently been weak for almost two years now. There was modest improvement in tone of management guidance on the Q2 earnings calls, but the majority of companies providing guidance still guided lower.

Given the global growth worries, it is likely that the quality and quantity of guidance will deteriorate even further this earnings season. Importantly, continued negative guidance will effectively guarantee that we will see a repeat of negative estimate revisions, with estimates for Q4 coming down as earnings season unfolds.

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Note: For a complete analysis of 2014 Q3 estimates, please check out weekly Earnings Trends report.


  • Not much on the economic or earnings calendars today (Columbus Day).

Tuesday -10/14

  • J.P. Morgan (JPM - Analyst Report) , Citi (C) and Wells Fargo (WFC - Analyst Report) will be the key earnings reports in the morning, while Intel (INTC - Analyst Report) will report after the close.
  • Earnings ESP or Expected Surprise Prediction, our proprietary leading indicator of positive earnings surprises is showing Wells Fargo coming out with an earnings beat.
  • Our research shows that companies with Zacks Rank #1 (Strong Buy), #2 (Buy) and # 3 (Hold) coupled with a positive ESP are highly likely to beat EPS estimates. Zacks Rank #3 (Hold) Wells Fargo has Earnings ESP of +1%.
  • For more details on Zacks Earnings ESP, please click here.


  • We will get the September Retail Sales and October Empire State regional manufacturing survey in the morning.
  • Bank of America (BAC) will be the key earnings report in the morning, while Netflix (NFLX - Analyst Report) and eBay (EBAY) will report after the close.

Thursday -10/16

  • In addition to weekly Jobless Claims, we will get the September Industrial Production and October Philly Fed survey in the morning.
  • Delta (DAL), Goldman Sachs (GS - Analyst Report) and PPG (PPG - Analyst Report) will be the key reports in the morning, while Google (GOOGL - Analyst Report) will report after the close.


  • The September Housing Starts will be the key economic reading today
  • General Electric (GE) and Morgan Stanley (MS - Analyst Report) will be the notable reports in the morning.

Here is a list of the 125 companies reporting this week, including 51 S&P 500 members.

Company Ticker Current Qtr Year-Ago Qtr Last EPS Surprise % Report Day Time
STANLEY FURN CO STLY -0.08 -0.17 16.67 Monday N/A
CITIGROUP INC C 1.12 1 14.81 Tuesday BTO
CSX CORP CSX 0.47 0.46 1.92 Tuesday AMC
INTEL CORP INTC 0.65 0.58 5.77 Tuesday AMC
JOHNSON & JOHNS JNJ 1.42 1.36 7.79 Tuesday BTO
JPMORGAN CHASE JPM 1.39 1.42 12.31 Tuesday BTO
LINEAR TEC CORP LLTC 0.54 0.47 5.88 Tuesday AMC
WELLS FARGO-NEW WFC 1.02 0.99 0 Tuesday BTO
ADTRAN INC ADTN 0.22 0.29 8 Tuesday AMC
DEL FRISCOS RST DFRG 0.07 0.1 -4.76 Tuesday BTO
DOMINOS PIZZA DPZ 0.61 0.51 3.08 Tuesday BTO
HUNT (JB) TRANS JBHT 0.85 0.75 0 Tuesday BTO
KMG CHEMICALS KMG N/A 0.28 -4.35 Tuesday BTO
NEPTUNE TEC&BIO NEPT -0.11 -0.06 25 Tuesday N/A
BANK OZARKS OZRK 0.39 0.31 3.03 Tuesday AMC
SARATOGA INVEST SAR 0.37 0.48 5.56 Tuesday AMC
SYNERGETICS USA SURG 0.04 0.06 0 Tuesday AMC
WOLVERINE WORLD WWW 0.59 0.58 14.81 Tuesday BTO
AMER EXPRESS CO AXP 1.38 1.25 6.52 Wednesday AMC
BANK OF AMER CP BAC -0.09 0.28 6.9 Wednesday BTO
BLACKROCK INC BLK 4.71 3.88 9.64 Wednesday BTO
EBAY INC EBAY 0.57 0.54 -1.72 Wednesday AMC
KEYCORP NEW KEY 0.26 0.25 8 Wednesday BTO
Kinder Morgan KMI 0.33 0.32 -3.6 Wednesday N/A
NAVIENT CORP NAVI 0.51 N/A 1.82 Wednesday AMC
NETFLIX INC NFLX 0.91 0.52 0.88 Wednesday AMC
PNC FINL SVC CP PNC 1.7 1.79 4.52 Wednesday BTO
SCHWAB(CHAS) SCHW 0.25 0.22 0 Wednesday BTO
ST JUDE MEDICAL STJ 0.96 0.9 2 Wednesday BTO
UTD RENTALS INC URI 2.05 1.63 15.38 Wednesday AMC
ASTORIA FINL CP AF 0.16 0.15 25 Wednesday AMC
ASML HOLDING NV ASML 0.72 0.58 20.39 Wednesday BTO
BANCO LATINOAME BLX 0.67 0.59 -17.19 Wednesday N/A
BADGER METER BMI 0.68 0.63 3.39 Wednesday AMC
C1 FINANCIAL BNK 0.17 N/A N/A Wednesday AMC
BOSTON PRIV FIN BPFH 0.21 0.2 19.05 Wednesday AMC
COMMERCE BANCSH CBSH 0.71 0.71 2.94 Wednesday BTO
COHEN&STRS INC CNS 0.5 0.41 11.36 Wednesday AMC
EAGLE BCP INC EGBN 0.51 0.44 0 Wednesday AMC
HNI CORP HNI 0.7 0.61 11.43 Wednesday AMC
IGATE CORP IGTE 0.46 0.43 0 Wednesday BTO
LAS VEGAS SANDS LVS 0.85 0.82 -4.49 Wednesday AMC
MEDGENICS INC MDGN -0.25 -0.25 8.7 Wednesday BTO
MGIC INVSTMT CP MTG 0.11 0.04 -7.69 Wednesday BTO
PLATINUM UNDRWT PTP 1.07 1.33 -1.45 Wednesday AMC
RLI CORP RLI 0.6 0.7 0 Wednesday AMC
UNIVL FST PRODS UFPI 0.94 0.71 -14.39 Wednesday AMC
UMPQUA HLDGS CP UMPQ 0.29 0.24 17.39 Wednesday AMC
ZHONE TECH INC ZHNE -0.03 0.05 -50 Wednesday AMC
ALLIANCE DATA ADS 3.12 2.52 6.61 Thursday BTO
BAXTER INTL BAX 1.31 1.19 4.13 Thursday BTO
BB&T CORP BBT 0.71 0.7 -6.67 Thursday BTO
BAKER-HUGHES BHI 1.15 0.81 3.37 Thursday BTO
CAPITAL ONE FIN COF 1.91 1.88 15.08 Thursday AMC
DELTA AIR LINES DAL 1.18 1.41 0.97 Thursday BTO
DANAHER CORP DHR 0.88 0.84 1.06 Thursday BTO
DOVER CORP DOV 1.33 1.54 0 Thursday BTO
FIFTH THIRD BK FITB 0.43 0.4 8.89 Thursday BTO
GOOGLE INC-CL C GOOG 6.33 8.74 N/A Thursday AMC
GOOGLE INC-CL A GOOGL 5.35 4.37 -1.36 Thursday AMC
GOLDMAN SACHS GS 3.21 2.88 33.55 Thursday BTO
GRAINGER W W GWW 3.28 2.95 -0.64 Thursday BTO
MATTEL INC MAT 1.06 1.16 -84.21 Thursday BTO
PEOPLES UTD FIN PBCT 0.21 0.2 20 Thursday AMC
PHILIP MORRIS PM 1.34 1.44 13.71 Thursday BTO
PPG INDS INC PPG 2.76 2.44 1.43 Thursday BTO
SCHLUMBERGER LT SLB 1.47 1.29 1.48 Thursday AMC
SNAP-ON INC SNA 1.61 1.43 7.14 Thursday BTO
SANDISK CORP SNDK 1.25 1.51 0.77 Thursday AMC
STRYKER CORP SYK 1.14 0.98 -0.92 Thursday AMC
UNITEDHEALTH GP UNH 1.53 1.53 13.6 Thursday BTO
XILINX INC XLNX 0.55 0.49 1.64 Thursday AMC
ADV MICRO DEV AMD 0.04 0.04 -33.33 Thursday AMC
AMER RIVER BSH AMRB 0.12 0.1 18.18 Thursday AMC
ASSOC BANC CORP ASBC 0.29 0.27 0 Thursday AMC
ATHENAHEALTH IN ATHN 0.06 0.16 350 Thursday AMC
BRIDGE CAP HLDG BBNK 0.29 0.29 -6.9 Thursday AMC
BRIGGS & STRATT BGG -0.37 -0.35 -11.43 Thursday BTO
BRITISH SKY BRO BSYBY N/A 0.84 7.14 Thursday N/A
BLACKSTONE GRP BX 0.85 0.56 64.29 Thursday BTO
CAPITAL BNK FIN CBF 0.26 0.22 4 Thursday BTO
CROWN HLDGS INC CCK 1.22 1.13 1 Thursday AMC
COBIZ FINL INC COBZ 0.18 0.17 23.53 Thursday AMC
CEPHEID INC CPHD -0.16 -0.02 23.08 Thursday AMC
CYPRESS SEMICON CY 0.08 0.02 166.67 Thursday BTO
CYTEC INDS INC CYT 0.73 0.67 13.25 Thursday AMC
EASTGROUP PPTYS EGP 0.88 0.83 -1.18 Thursday AMC
FIRST CASH FINL FCFS 0.69 0.68 1.85 Thursday BTO
FAIRCHILD SEMI FCS 0.21 0.17 81.82 Thursday BTO
FIRST REP BK SF FRC 0.79 0.64 0 Thursday BTO
HOME BANCSHARES HOMB 0.45 0.33 0 Thursday BTO
INDEP BK MASS INDB 0.65 0.63 0 Thursday AMC
CLUBCORP HLDGS MYCC 0.09 -0.1 -57.14 Thursday BTO
NETSCOUT SYSTMS NTCT 0.27 0.28 47.62 Thursday BTO
PREFERRED BANK PFBC 0.44 0.37 10.26 Thursday BTO
POOL CORP POOL 0.78 0.68 -0.62 Thursday BTO
PRIVATEBANCORP PVTB 0.47 0.42 18.18 Thursday BTO
QLOGIC CORP QLGC 0.18 0.18 0 Thursday AMC
SANDY SPRING SASR 0.44 0.48 -26.32 Thursday BTO
SONOCO PRODUCTS SON 0.68 0.63 -3.08 Thursday BTO
SUPERVALU INC SVU 0.11 0.13 5.88 Thursday BTO
TAIWAN SEMI-ADR TSM 0.49 0.34 2.7 Thursday BTO
TRAVELZOO INC TZOO 0.12 0.19 7.14 Thursday BTO
MARRIOT VAC WW VAC 0.82 0.72 16 Thursday BTO
WESTERN ALLIANC WAL 0.4 0.32 10.81 Thursday AMC
WEBSTER FINL CP WBS 0.52 0.49 -1.96 Thursday BTO
WD 40 CO WDFC 0.66 0.53 -4.17 Thursday AMC
WINNEBAGO WGO 0.46 0.38 2.44 Thursday BTO
WNS HLDGS-ADR WNS 0.34 0.29 20 Thursday BTO
WINTRUST FINL WTFC 0.78 0.71 5.56 Thursday AMC
BANK OF NY MELL BK 0.61 0.6 10.71 Friday BTO
COMERICA INC CMA 0.81 0.78 5.26 Friday BTO
GENL ELECTRIC GE 0.38 0.36 0 Friday BTO
HUNTINGTON BANC HBAN 0.19 0.2 5.56 Friday BTO
HONEYWELL INTL HON 1.41 1.24 1.47 Friday BTO
KANSAS CITY SOU KSU 1.26 1.1 3.42 Friday BTO
MORGAN STANLEY MS 0.55 0.5 9.09 Friday BTO
SUNTRUST BKS STI 0.82 0.66 10.96 Friday BTO
TEXTRON INC TXT 0.54 0.35 36.17 Friday BTO
FIRST HRZN NATL FHN 0.17 0.19 100 Friday BTO
KNOLL INC KNL 0.27 0.18 4.55 Friday BTO