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Zacks Earnings Trends Highlights: Netflix, Baker Hughes and Halliburton
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For Immediate Release
Chicago, IL – April 21, 2022 – Zacks Director of Research Sheraz Mian says,"Bigger-than-expected cost pressures are causing an above-average proportion of companies to miss earnings estimates at this stage in the 2022 Q1 season."
Positive Surprises at Covid Lows
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>>>
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.
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.
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.
Why Haven't You Looked at Zacks' Top Stocks?
Our 5 best-performing strategies have blown away the S&P's impressive +28.8% gain in 2021. Amazingly, they soared +40.3%, +48.2%, +67.6%, +94.4%, and +95.3%. Today you can access their live picks without cost or obligation.
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: Netflix, Baker Hughes and Halliburton
For Immediate Release
Chicago, IL – April 21, 2022 – Zacks Director of Research Sheraz Mian says,"Bigger-than-expected cost pressures are causing an above-average proportion of companies to miss earnings estimates at this stage in the 2022 Q1 season."
Positive Surprises at Covid Lows
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>>>
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.
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.
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.
Why Haven't You Looked at Zacks' Top Stocks?
Our 5 best-performing strategies have blown away the S&P's impressive +28.8% gain in 2021. Amazingly, they soared +40.3%, +48.2%, +67.6%, +94.4%, and +95.3%. Today you can access their live picks without cost or obligation.
See Stocks Free >>
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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.