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Earnings Preview

No one is expected to pay attention to earnings given the unexpected Brexit vote, but the Q2 earnings season has gotten underway, with results from 10 S&P 500 members already out. All of these early reporters, which includes major operators like FedEx (FDX - Free Report) , Oracle (ORCL - Free Report) and Adobe (ADBE - Free Report) , have fiscal quarters ending in May, but get clubbed as part of the June quarter tally. We have another 11 index members with fiscal quarters ending in May on deck to report results this week. All in all, we will have seen Q2 results from almost two dozen S&P 500 members by the time Alcoa (AA) comes out with its results on July 11th.

The chart below shows the weekly calendar of earnings releases for the entire Q2 earnings cycle. As you can see, we are about three weeks away from the reporting cycle really ramping up.

Expectations for the Quarter

Total earnings for the 10 index members that have reported results are up +4.1% on +4.2% higher revenues, with 60% beating EPS estimates and equal proportion coming ahead of top-line expectations. Comparison of the Q2 results thus far with prior periods offers a mixed picture. But it’s likely too small a sample to draw any conclusions from in any case.

For Q2 as a whole, total earnings for the S&P 500 are expected to be down -6.1% on -0.7% lower revenues, with growth in negative territory for 9 of the 16 Zacks sectors. As has been the pattern in other recent periods, the Energy sector remains the biggest drag on the aggregate growth picture, with total earnings for the sector expected to be down -78.9% on -27.1% lower revenues. Excluding the Energy sector, earnings for the rest of the index would be down -2.7%.

The table below shows the summary picture for Q2 contrasted with what was actually achieved in the preceding period.

Estimates for Q2 faithfully followed the well-trodden path of previous quarters, as the chart below shows.

As negative as this revisions trend looks, it is nevertheless an improvement over what we had seen in the comparable period(s) in other recent quarters. The improved commodity-price backdrop and the reduced dollar drag are some of the explanations for this development. It will be interesting to see if this trend of decelerated negative revisions will continue this earnings season. But we will have to wait a few more weeks to get a better read on this development after companies start reporting June quarter results and guide towards Q3 estimates. Current estimates for Q3 are showing flat growth from the year-earlier level.

Expectations Beyond Q2

The chart below shows current quarterly earnings growth expectations for the index in 2016 Q2 and the following four quarters contrasted with actual declines in the preceding three quarters. As you can see, growth is expected to be negative in 2016 Q2 and flat in the following quarter.

The only meaningful positive earnings growth this year is expected to come from the last quarter of the year, which is then expected to continue into 2017 when earnings for the S&P 500 index are expected to be up in double-digits. We will see if those estimates will hold up as we reach the last quarter of the year. But given what we have seen over the last few quarters, the odds don’t look that favorable.

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Note: For a complete analysis of 2016 Q2 estimates, please check out weekly Earnings Trends report.

Here is a list of the 32 companies reporting this week, including 11 S&P 500 members.

Company

Ticker

Q0 EST

Year Ago

Last EPS
Surprise

Report Date

Time

SUPERCOM LTD  

SPCB     

0.03

0.21

0.00%

Monday

BTO

CARNIVAL CORP 

CCL      

0.39

0.25

25.81%

Tuesday

BTO

CARNIVAL PLC  

CUK      

N/A

0.25

25.00%

Tuesday

BTO

IHS INC-A     

IHS      

1.14

1.18

8.82%

Tuesday

BTO

BARNES NOB EDUC

BNED     

-0.11

N/A

0.00%

Tuesday

BTO

FACTSET RESH  

FDS      

1.63

1.42

4.61%

Tuesday

BTO

NIKE INC-B    

NKE      

0.48

0.49

14.58%

Tuesday

AMC

SCHULMAN(A) INC

SHLM     

0.78

0.72

14.81%

Tuesday

AMC

AEROVIRONMENT 

AVAV     

-0.08

0.32

440.00%

Tuesday

AMC

CALAMP CORP   

CAMP     

0.17

0.24

0.00%

Tuesday

AMC

NOVAGOLD RSRCS

NG       

N/A

-0.03

0.00%

Tuesday

N/A

GENL MILLS    

GIS      

0.6

0.75

4.84%

Wednesday

BTO

MONSANTO CO-NEW

MON      

2.41

2.39

-1.22%

Wednesday

BTO

ACUITY BRANDS 

AYI      

1.97

1.37

13.33%

Wednesday

BTO

UNIFIRST CORP 

UNF      

1.37

1.61

-7.20%

Wednesday

BTO

OMNOVA SOLUTION

OMN      

0.14

0.11

300.00%

Wednesday

BTO

PIER 1 IMPORTS

PIR      

-0.06

0.08

9.52%

Wednesday

AMC

EXFO INC      

EXFO     

0.05

0.02

50.00%

Wednesday

AMC

INVESTORS RL ES

IRET     

0.14

0.16

8.33%

Wednesday

AMC

PROGRESS SOFTWA

PRGS     

0.21

0.27

-5.26%

Wednesday

AMC

XPLORE TECH CP

XPLR     

0.01

-0.05

-12.50%

Wednesday

AMC

8POINT3 ENERGY

CAFD     

-0.02

N/A

307.69%

Wednesday

N/A

WORTHINGTON IND

WOR      

0.63

0.52

-4.17%

Wednesday

N/A

PAYCHEX INC   

PAYX     

0.49

0.44

0.00%

Thursday

BTO

DARDEN RESTRNT

DRI      

1.08

1.08

0.83%

Thursday

BTO

CONAGRA FOODS 

CAG      

0.52

0.59

17.24%

Thursday

BTO

MCCORMICK & CO

MKC      

0.74

0.75

7.25%

Thursday

BTO

CONSTELLATN BRD

STZ      

1.51

1.26

4.39%

Thursday

BTO

LINDSAY CORP  

LNN      

0.97

1.1

-27.59%

Thursday

BTO

SCHNITZER STEEL

SCHN     

0.14

0

3.85%

Thursday

BTO

FRANKLIN COVEY

FC       

0.08

0.13

-160.00%

Thursday

AMC

MICRON TECH   

MU       

-0.1

0.54

44.44%

Thursday

N/A


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