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The March quarter still has a couple of weeks left, but the 2022 Q1 earnings season already started. Reports so far are for their fiscal quarters ending in February, which we count as part of our March-quarter tally. JPMorgan and the other big banks will spearhead the March-quarter reporting cycle on April 13th.
The geopolitical uncertainty in the wake of the Ukraine situation adds to the market’s existing worries about inflation and supply-chain challenges that have been recurring themes in recent months. The addition of geopolitical tensions to the mix has direct implications for the inflation outlook through higher prices for energy and other commodities.
We knew all along that earnings growth was expected to decelerate significantly in the current and coming quarters, after remaining very strong in the preceding periods. But the outlook for earnings had started easing even before the recent geopolitical developments. We saw this in the revisions trend, which had been mixed at best.
The expectation currently is for 2022 Q1 estimates to be up +3.7% from the same period last year on +9.8% higher revenues. In other words, current bottom-up estimates reflect compression in margins, which is in line with the aforementioned inflationary trends.
For full-year 2022, the expectation is of earnings growth +7.3% on +6.2% revenue growth. This would follow the +49.9% earnings growth in 2021.
Full-year 2022 earnings estimates have modestly inched up since the start of the year, with total S&P 500 earnings up +1.4% since the start of January. There is a lot of cross-currents at the sector level, with estimates going down for 10 of the 16 Zacks sectors and going up for the rest. In fact, it is the positive revisions to the Energy sector that are offsetting the estimate cuts in the aggregate.
Excluding the positive revisions to the Energy sector, total S&P 500 earnings for 2022 would be down -11.9% since the start of January. The biggest declines have been for the Consumer Discretionary, Transportation and Utilities sectors.
While on the topic of estimate cuts, it is worth pointing out that FedEx, which is part of our Transportation sector and will be reporting quarterly results after the market’s close on March 17th, suffered modest estimate cuts to its fiscal February quarter. The current Zacks Consensus EPS for FedEx of $4.70 is down from $4.74 a month back and $4.78 two months back.
Estimates for other transportation players like the airlines have come down a lot more, as they are on the receiving end of the oil price hike that’s benefiting the Energy sector.
The chart below shows quarterly net margins for Q1 in the context of where margins have been in recent quarters and what is embedded in current estimates for the coming quarters.
For Q1, margins are expected to be below the year-earlier level for 9 of the 16 Zacks sectors, with strong margin gains for three sectors (Energy, Transportation and Basic Materials).
The growth picture has shifted materially for the Finance and Technology sectors, the two biggest earnings contributors to the index. Total Finance sector earnings are expected to be down -17.6% from the same period last year on +2.4% higher revenues, while Tech sector earnings are expected to be down -0.6% in Q1 on +7.6% higher revenues.
The Q1 Earnings Season Scorecard
The Q1 earnings season will really get going with the big banks reporting March quarter results in mid-April. But the early reports have come out already, with results from AutoZone, Costco and Oracle for their respective fiscal quarters ending in February qualify.
We will have seen such Q1 results from almost two dozen S&P 500 members by the time JPMorgan comes out with quarterly results on April 13th.
For the three index members that have reported Q1 results already, total earnings are down -1.4% from the same period last year on +14.2% higher revenues, with 66.7% beating EPS estimates (two out of the three) and all of them beating revenue estimates.
For a detailed look at the overall earnings picture, including expectations for the coming periods, please check out our weekly Earnings Trends report >>>>A Rising Energy Sector Offsets Declines Elsewhere
Just Released: Zacks Top 10 Stocks for 2022
In addition to the investment ideas discussed above, would you like to know about our 10 top picks for the entirety of 2022?
From inception in 2012 through 2021, the Zacks Top 10 Stocks portfolios gained an impressive +1,001.2% versus the S&P 500’s +348.7%. Now our Director of Research has combed through 4,000 companies covered by the Zacks Rank and has handpicked the best 10 tickers to buy and hold. Don’t miss your chance to get in…because the sooner you do, the more upside you stand to grab.
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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JPMorgan, FedEx, AutoZone, Costco and Oracle are part of Zacks Earnings Preview
For Immediate Release
Chicago, IL – March 14, 2022 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes JPMorgan (JPM - Free Report) , FedEx (FDX - Free Report) , AutoZone (AZO - Free Report) , Costco (COST - Free Report) and Oracle (ORCL - Free Report) .
What to Expect from Q1 2022 Earnings Season
The March quarter still has a couple of weeks left, but the 2022 Q1 earnings season already started. Reports so far are for their fiscal quarters ending in February, which we count as part of our March-quarter tally. JPMorgan and the other big banks will spearhead the March-quarter reporting cycle on April 13th.
The geopolitical uncertainty in the wake of the Ukraine situation adds to the market’s existing worries about inflation and supply-chain challenges that have been recurring themes in recent months. The addition of geopolitical tensions to the mix has direct implications for the inflation outlook through higher prices for energy and other commodities.
We knew all along that earnings growth was expected to decelerate significantly in the current and coming quarters, after remaining very strong in the preceding periods. But the outlook for earnings had started easing even before the recent geopolitical developments. We saw this in the revisions trend, which had been mixed at best.
The expectation currently is for 2022 Q1 estimates to be up +3.7% from the same period last year on +9.8% higher revenues. In other words, current bottom-up estimates reflect compression in margins, which is in line with the aforementioned inflationary trends.
For full-year 2022, the expectation is of earnings growth +7.3% on +6.2% revenue growth. This would follow the +49.9% earnings growth in 2021.
Full-year 2022 earnings estimates have modestly inched up since the start of the year, with total S&P 500 earnings up +1.4% since the start of January. There is a lot of cross-currents at the sector level, with estimates going down for 10 of the 16 Zacks sectors and going up for the rest. In fact, it is the positive revisions to the Energy sector that are offsetting the estimate cuts in the aggregate.
Excluding the positive revisions to the Energy sector, total S&P 500 earnings for 2022 would be down -11.9% since the start of January. The biggest declines have been for the Consumer Discretionary, Transportation and Utilities sectors.
While on the topic of estimate cuts, it is worth pointing out that FedEx, which is part of our Transportation sector and will be reporting quarterly results after the market’s close on March 17th, suffered modest estimate cuts to its fiscal February quarter. The current Zacks Consensus EPS for FedEx of $4.70 is down from $4.74 a month back and $4.78 two months back.
Estimates for other transportation players like the airlines have come down a lot more, as they are on the receiving end of the oil price hike that’s benefiting the Energy sector.
The chart below shows quarterly net margins for Q1 in the context of where margins have been in recent quarters and what is embedded in current estimates for the coming quarters.
For Q1, margins are expected to be below the year-earlier level for 9 of the 16 Zacks sectors, with strong margin gains for three sectors (Energy, Transportation and Basic Materials).
The growth picture has shifted materially for the Finance and Technology sectors, the two biggest earnings contributors to the index. Total Finance sector earnings are expected to be down -17.6% from the same period last year on +2.4% higher revenues, while Tech sector earnings are expected to be down -0.6% in Q1 on +7.6% higher revenues.
The Q1 Earnings Season Scorecard
The Q1 earnings season will really get going with the big banks reporting March quarter results in mid-April. But the early reports have come out already, with results from AutoZone, Costco and Oracle for their respective fiscal quarters ending in February qualify.
We will have seen such Q1 results from almost two dozen S&P 500 members by the time JPMorgan comes out with quarterly results on April 13th.
For the three index members that have reported Q1 results already, total earnings are down -1.4% from the same period last year on +14.2% higher revenues, with 66.7% beating EPS estimates (two out of the three) and all of them beating revenue estimates.
For a detailed look at the overall earnings picture, including expectations for the coming periods, please check out our weekly Earnings Trends report >>>>A Rising Energy Sector Offsets Declines Elsewhere
Just Released: Zacks Top 10 Stocks for 2022
In addition to the investment ideas discussed above, would you like to know about our 10 top picks for the entirety of 2022?
From inception in 2012 through 2021, the Zacks Top 10 Stocks portfolios gained an impressive +1,001.2% versus the S&P 500’s +348.7%. Now our Director of Research has combed through 4,000 companies covered by the Zacks Rank and has handpicked the best 10 tickers to buy and hold. Don’t miss your chance to get in…because the sooner you do, the more upside you stand to grab.
See 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.