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Chicago, IL – October 1, 2020 – Zacks Director of Research Sheraz Mian says, “For full-year 2020, total earnings for the S&P 500 index are currently expected to be down -20.6% on -4.7% lower revenues. As with Q3 estimates, full-year estimates have improved since early July."
Looking at the Improving Outlook Ahead of Q3 Earnings Season
Note: The following is an excerpt from this week’s Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>
Here are the key points:
The outlook for corporate earnings has been steadily improving since early July, driven mostly by a better-than-expected economic recovery. This trend has been confirmed by the early 2020 Q3 recent earnings releases.
For 2020 Q3, total S&P 500 earnings are expected to decline -22.8% on -2.8% lower revenues. This is an improvement from the -26.5% earnings decline expected at the start of July and follows the -32.4% earnings drop in Q2.
Sectors with the weakest Q3 growth outlook remain the social-distancing exposed spaces like Transportation (-122.5% earnings decline), Energy (-102.2%), and Consumer Discretionary (-85.7%).
Out of the total 16 Zacks sectors, 14 sectors are expected to experience earnings declines in Q3, with Construction and Medical as the only sectors expected to show earnings growth.
Utilities (-3.4%), Technology (-3.8%), and Retail (-4.3%) are the sectors with the lowest expected earnings declines in Q3.
Q3 earnings for the Finance, Industrial Products and Basic Materials sectors are expected to be down -25.5%, -25.6% and -26.5% from the year-earlier period, respectively.
For full-year 2020, total earnings for the S&P 500 index are currently expected to be down -20.6% on -4.7% lower revenues. As with Q3 estimates, full-year estimates have improved since early July.
Growth is expected to resume next year, thanks to easy comparisons, but the dollar level of earnings in 2021 will still be below the 2019 level.
The implied ‘EPS’ for the S&P 500 index, calculated using current 2020 P/E of 26.3X and index close, as of September 29th, is $126.94, down from $159.85 in 2019. Using the same methodology, the index ‘EPS’ works out to $158.99 for 2021 (P/E of 21.0X). The multiples for 2020 and 2021 have been calculated using the index’s total market cap and aggregate bottom-up earnings for each year.
Please note that while full-year 2021 earnings for the S&P 500 index are currently expected to be up +25.2% from the 2020 level, the absolute dollar amount of 2021 earnings estimates remain below the 2019 level.
For the small-cap S&P 600 index, Q3 earnings are expected to be down -39.5% from the same period last year on -4.1% lower revenues, which would follow a -63.1% decline on -16.8% lower revenues in 2020 Q2.
For full-year 2020, the S&P 600 index is expected to experience a -39.6% decline in earnings on -4.9% lower revenues, with easy comps pushing earnings growth to +46.3% in 2021.
The Q3 earnings season will really get underway after the big banks come out with quarterly results on October 13th. But we will have counted almost two dozen companies to have reported Q3 results by that time, as we and other data vendors consider companies currently reporting their fiscal quarters ending in August as part of the Q3 tally.
Using that definition, we count the 15 S&P 500 members that reported quarterly results in recent days, which includes the likes of Micron Technology, Inc. (MU - Free Report) , Costco Wholesale Corporation (COST - Free Report) , NIKE, Inc. (NKE - Free Report) , Oracle Corporation (ORCL - Free Report) , FedEx Corporation (FDX - Free Report) and others. The tone and substance of management commentary from most of these 15 companies has been positive, which likely raises hopes that the Q3 reporting cycle will show an incrementally improving outlook for operators in a variety of sectors.
We saw some of these improvements in the last reporting cycle (2020 Q2) as well, which helped turn the estimate revisions around.
We are seeing a similar improvement in estimates for Q4 2020 and full-year 2021 as well.
The recent flow of economic readings has been broadly positive, suggesting that the hoped-for recovery is firmly in place. This is showing up in earnings estimates as well, as indicated earlier. The hope is that this improving trend can be sustained even as the underlying health issue remains unresolved.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Earnings Trends Highlights: Micron Technology, Costco, NIKE, Oracle and FedEx
For Immediate Release
Chicago, IL – October 1, 2020 – Zacks Director of Research Sheraz Mian says, “For full-year 2020, total earnings for the S&P 500 index are currently expected to be down -20.6% on -4.7% lower revenues. As with Q3 estimates, full-year estimates have improved since early July."
Looking at the Improving Outlook Ahead of Q3 Earnings Season
Note: The following is an excerpt from this week’s Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>
Here are the key points:
The Q3 earnings season will really get underway after the big banks come out with quarterly results on October 13th. But we will have counted almost two dozen companies to have reported Q3 results by that time, as we and other data vendors consider companies currently reporting their fiscal quarters ending in August as part of the Q3 tally.
Using that definition, we count the 15 S&P 500 members that reported quarterly results in recent days, which includes the likes of Micron Technology, Inc. (MU - Free Report) , Costco Wholesale Corporation (COST - Free Report) , NIKE, Inc. (NKE - Free Report) , Oracle Corporation (ORCL - Free Report) , FedEx Corporation (FDX - Free Report) and others. The tone and substance of management commentary from most of these 15 companies has been positive, which likely raises hopes that the Q3 reporting cycle will show an incrementally improving outlook for operators in a variety of sectors.
We saw some of these improvements in the last reporting cycle (2020 Q2) as well, which helped turn the estimate revisions around.
We are seeing a similar improvement in estimates for Q4 2020 and full-year 2021 as well.
The recent flow of economic readings has been broadly positive, suggesting that the hoped-for recovery is firmly in place. This is showing up in earnings estimates as well, as indicated earlier. The hope is that this improving trend can be sustained even as the underlying health issue remains unresolved.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
See the 5 high-tech stocks now>>
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.