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Amazon, Best Buy, HP and Lululemon are part of Zacks Earnings Preview
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For Immediate Release
Chicago, IL – August 29, 2022 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Amazon (AMZN - Free Report) , Best Buy (BBY - Free Report) , HP Inc. (HPQ - Free Report) and Lululemon (LULU - Free Report) .
Exploring Weak Retail Sector Earnings and Guidance
The overall trend emerging from the Retail sector's Q2 results has been on the weak side, with most operators suffering from softening sales, rising expenses, bigger than expected inventory builds and lowered guidance for the current period.
Multiple factors are at play here. Many companies experienced merchandising missteps and failed to accurately read evolving consumer behavior. On top of that, retailers came up short in responding to an admittedly tough operating environment characterized by rising costs.
The consumer is still healthy, supported by low debt loads, adequate savings and rising wages as a result of a tight labor market. But there is growing evidence that lower-income consumers are starting to feel the squeeze, with rampant inflation eating into, if not altogether offsetting, wage gains. It would make sense for such a consumer to spend less on discretionary items and more on everyday necessities.
As a result of these factors, a significantly smaller proportion of retailers have been able to beat consensus EPS estimates. Also, while Q3 estimates have been coming down for most sectors, the Retail sector is among those suffering a larger magnitude of negative revisions.
With respect to the Retail sector scorecard, we now have Q2 results from 32 of the 34 retailers in the S&P 500 index. Total earnings for these retailers are down -20.3% from the same period last year on +7.7% higher revenues, with 71.9% beating EPS estimates and 43.8% beating revenue estimates.
A big driver of the -20.3% earnings decline for the quarter is the drag from Amazon, whose Q2 earnings were down -86.5% from the year-earlier period. Excluding the Amazon drag, Q2 earnings for the remaining retailers would be down -3.4%.
The Q2 revenue beats percentage of 43.8% is a new low for this group of 32 retailers over the last 5 years (the preceding 20 quarters).
Q2 Earnings Season Scorecard (as of August 26th, 2022)
For the 487 S&P 500 members that have reported Q2 results already, total earnings are up +6.9% on +14.3% higher revenues, with 77.2% beating EPS estimates and 68.8% beating revenue estimates.
Excluding the Finance sector drag, the Q2 earnings growth for the remainder of the index improves to +14.3% and declines to -3.6% on an ex-Energy basis.
As we have been pointing out all along, the Q2 EPS and revenue beats percentage has been on the lower side relative to other recent periods, though not as low as we saw with the Retail sector.
The reporting cycle is winding down, with this week bringing in results from over 100 companies, including 10 S&P 500 members. Notable companies reporting this week include Best Buy, HP Inc. and Lululemon.
Looking at Q2 as a whole, combining the bulk of the reported results with the few results still to come, total earnings are on track be up +6.8% on +14% higher revenues.
While the Q2 earnings growth rate isn't much, the aggregate dollar total of quarterly earnings is on track to reach a new all-time quarterly record at $505.9 billion, spotlighting that inflation isn't necessarily a negative for corporate earnings.
The Current Earnings Backdrop
Earnings and revenues for the current period (2022 Q3) are currently expected to be up +1.8% and +9.1%, respectively.
Aggregate Q3 earnings estimates have declined -5.7% in the above time period (since mid-June), with 14 of the 16 Zacks sectors suffering negative revisions and two sectors enjoying positive revisions.
Estimates have come down the most for the Consumer Discretionary, Consumer Staples, Conglomerates, Technology and the Retail sectors. On the positive side, estimates have gone up for the Energy and Autos sectors.
The positive revisions trend for the Energy sector has been a persistent feature of the overall earnings picture in recent periods. In this respect, the Q3 revisions trend is consistent with what we had been seeing in other recent periods as well, with higher estimates for the Energy sector offsetting cuts elsewhere.
That said, Q3 estimates outside the Energy sector have dropped relatively more than what we saw ahead of the Q2 earnings season.
A similar downward adjustment is underway for the full-year estimates as well. But growth is still expected to be positive next year and the year after, hardly a recessionary outlook.
For a detailed look at the overall earnings picture, including expectations for the coming periods, please check out our weekly Earnings Trends report >>>>Making Sense of Fading Earnings Estimates
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.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/performancefor information about the performance numbers displayed in this press release.
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Amazon, Best Buy, HP and Lululemon are part of Zacks Earnings Preview
For Immediate Release
Chicago, IL – August 29, 2022 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Amazon (AMZN - Free Report) , Best Buy (BBY - Free Report) , HP Inc. (HPQ - Free Report) and Lululemon (LULU - Free Report) .
Exploring Weak Retail Sector Earnings and Guidance
The overall trend emerging from the Retail sector's Q2 results has been on the weak side, with most operators suffering from softening sales, rising expenses, bigger than expected inventory builds and lowered guidance for the current period.
Multiple factors are at play here. Many companies experienced merchandising missteps and failed to accurately read evolving consumer behavior. On top of that, retailers came up short in responding to an admittedly tough operating environment characterized by rising costs.
The consumer is still healthy, supported by low debt loads, adequate savings and rising wages as a result of a tight labor market. But there is growing evidence that lower-income consumers are starting to feel the squeeze, with rampant inflation eating into, if not altogether offsetting, wage gains. It would make sense for such a consumer to spend less on discretionary items and more on everyday necessities.
As a result of these factors, a significantly smaller proportion of retailers have been able to beat consensus EPS estimates. Also, while Q3 estimates have been coming down for most sectors, the Retail sector is among those suffering a larger magnitude of negative revisions.
With respect to the Retail sector scorecard, we now have Q2 results from 32 of the 34 retailers in the S&P 500 index. Total earnings for these retailers are down -20.3% from the same period last year on +7.7% higher revenues, with 71.9% beating EPS estimates and 43.8% beating revenue estimates.
A big driver of the -20.3% earnings decline for the quarter is the drag from Amazon, whose Q2 earnings were down -86.5% from the year-earlier period. Excluding the Amazon drag, Q2 earnings for the remaining retailers would be down -3.4%.
The Q2 revenue beats percentage of 43.8% is a new low for this group of 32 retailers over the last 5 years (the preceding 20 quarters).
Q2 Earnings Season Scorecard (as of August 26th, 2022)
For the 487 S&P 500 members that have reported Q2 results already, total earnings are up +6.9% on +14.3% higher revenues, with 77.2% beating EPS estimates and 68.8% beating revenue estimates.
Excluding the Finance sector drag, the Q2 earnings growth for the remainder of the index improves to +14.3% and declines to -3.6% on an ex-Energy basis.
As we have been pointing out all along, the Q2 EPS and revenue beats percentage has been on the lower side relative to other recent periods, though not as low as we saw with the Retail sector.
The reporting cycle is winding down, with this week bringing in results from over 100 companies, including 10 S&P 500 members. Notable companies reporting this week include Best Buy, HP Inc. and Lululemon.
Looking at Q2 as a whole, combining the bulk of the reported results with the few results still to come, total earnings are on track be up +6.8% on +14% higher revenues.
While the Q2 earnings growth rate isn't much, the aggregate dollar total of quarterly earnings is on track to reach a new all-time quarterly record at $505.9 billion, spotlighting that inflation isn't necessarily a negative for corporate earnings.
The Current Earnings Backdrop
Earnings and revenues for the current period (2022 Q3) are currently expected to be up +1.8% and +9.1%, respectively.
Aggregate Q3 earnings estimates have declined -5.7% in the above time period (since mid-June), with 14 of the 16 Zacks sectors suffering negative revisions and two sectors enjoying positive revisions.
Estimates have come down the most for the Consumer Discretionary, Consumer Staples, Conglomerates, Technology and the Retail sectors. On the positive side, estimates have gone up for the Energy and Autos sectors.
The positive revisions trend for the Energy sector has been a persistent feature of the overall earnings picture in recent periods. In this respect, the Q3 revisions trend is consistent with what we had been seeing in other recent periods as well, with higher estimates for the Energy sector offsetting cuts elsewhere.
That said, Q3 estimates outside the Energy sector have dropped relatively more than what we saw ahead of the Q2 earnings season.
A similar downward adjustment is underway for the full-year estimates as well. But growth is still expected to be positive next year and the year after, hardly a recessionary outlook.
For a detailed look at the overall earnings picture, including expectations for the coming periods, please check out our weekly Earnings Trends report >>>>Making Sense of Fading Earnings Estimates
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/performancefor information about the performance numbers displayed in this press release.