We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Zacks Earnings Trends Highlights: FedEx, Nike and Carnival
Read MoreHide Full Article
For Immediate Release
Chicago, IL – October 13, 2022 – Zacks Director of Research Sheraz Mian says, "For the 21 S&P 500 members that have reported Q3 results already, EPS and revenue beats percentages are tracking the lowest levels in the preceding 5 years."
Breaking Down the Rough Start to 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 early 2022 Q3 results don’t inspire a lot of confidence about the overall earnings picture. At this admittedly early stage, companies appear to be struggling to beat consensus estimates that had already come down significantly.
For the 21 S&P 500 members that have reported Q3 results already, EPS and revenue beats percentages are tracking the lowest levels in the preceding 20 reporting cycles (5 years).
Looking at 2022 Q3 as a whole, total S&P 500 earnings are currently expected to be up +0.1% from the same period last year on +9.1% higher revenues. Excluding contributions from the Energy sector, Q3 earnings for the rest of the index would be -6.8% below the year-earlier level.
We are off to a rough start in the early Q3 results that have been coming out. All of these early reports have been from companies reporting results for their fiscal quarters ending in August, which we count as part of our September-quarter tally.
We have seen such Q3 results from 21 S&P 500 members already. Our comment about the ‘rough start’ that these results aren’t just about the disappointing results from the likes of FedEx (FDX - Free Report) , Nike (NKE - Free Report) , Carnival (CCL - Free Report) and others, but rather how so few of these companies have been able to beat estimates that had already come down significantly.
The proportion of these 21 index members beating EPS and revenue estimates is the lowest in the last 5 years.
It is premature to read too much into these early results. But it does appear that the market’s anxieties about corporate profitability may be coming to fruition this earnings season.
The flip side of this argument is that if results turn out to be less bad than what reports from FedEx, Carnival and others suggest, then the market will be relieved and we may see a replay of what we saw in the Q2 earnings season when results weren’t great, but they weren’t bad either.
That said, the strong U.S. dollar has joined the pre-existing headwinds of logistical challenges and inflationary pressures in weighing on corporate profitability. We will have to wait and see whether the Q3 reporting cycle will bring in the long-feared earnings downturn.
As we have been pointing out here, estimates have been coming down, with the overall revisions trend remaining negative even after accounting for the persistent favorable trend enjoyed by the Energy sector.
We see this trend of negative estimate revisions at play with the next few quarters as well as with full-year 2023 estimates.
Aggregate S&P 500 earnings outside of the Energy sector have declined -6.9% since mid-April, with double-digit percentage declines in Retail, Construction, Consumer Discretionary, and Tech. Estimates have been coming down in the Industrial Products, Medical and Finance sectors as well.
The Overall Earnings Picture
Please note that a big part of this year’s growth is thanks to the strong momentum in the Energy sector whose earnings are on track to grow +141.0% this year. Excluding this extraordinary Energy sector contribution, earnings growth for the rest of the index would be down -0.1%. This flat earnings picture for this year is also in-line with the economic ground reality.
Earnings next year are expected to be up +6.1% as a whole and +7.9% excluding the Energy sector. This magnitude of growth can hardly be called out-of-sync with a flat or even modestly down economic growth outlook. Don’t forget that headline GDP growth numbers are typically in real or inflation-adjusted terms while S&P 500 earnings discussed here are not.
As mentioned earlier, 2023 aggregate earnings estimates on an ex-Energy basis are already down -6.9% since mid-April. Perhaps we see a bit more downward adjustments to estimates over the coming weeks, after we have seen Q3 results. But we have nevertheless already covered some ground in taking estimates to a fair or appropriate level.
This is particularly so if whatever economic downturn lies ahead proves to be more of the garden-variety rather than the last two such events. Recency bias forces us to use the last two economic downturns, which were also among the nastiest in recent history, as our reference points. But we need to be cautious against that natural tendency as the economy’s foundations at present remain unusually strong.
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%,andv +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.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Zacks Earnings Trends Highlights: FedEx, Nike and Carnival
For Immediate Release
Chicago, IL – October 13, 2022 – Zacks Director of Research Sheraz Mian says, "For the 21 S&P 500 members that have reported Q3 results already, EPS and revenue beats percentages are tracking the lowest levels in the preceding 5 years."
Breaking Down the Rough Start to 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:
We are off to a rough start in the early Q3 results that have been coming out. All of these early reports have been from companies reporting results for their fiscal quarters ending in August, which we count as part of our September-quarter tally.
We have seen such Q3 results from 21 S&P 500 members already. Our comment about the ‘rough start’ that these results aren’t just about the disappointing results from the likes of FedEx (FDX - Free Report) , Nike (NKE - Free Report) , Carnival (CCL - Free Report) and others, but rather how so few of these companies have been able to beat estimates that had already come down significantly.
The proportion of these 21 index members beating EPS and revenue estimates is the lowest in the last 5 years.
It is premature to read too much into these early results. But it does appear that the market’s anxieties about corporate profitability may be coming to fruition this earnings season.
The flip side of this argument is that if results turn out to be less bad than what reports from FedEx, Carnival and others suggest, then the market will be relieved and we may see a replay of what we saw in the Q2 earnings season when results weren’t great, but they weren’t bad either.
That said, the strong U.S. dollar has joined the pre-existing headwinds of logistical challenges and inflationary pressures in weighing on corporate profitability. We will have to wait and see whether the Q3 reporting cycle will bring in the long-feared earnings downturn.
As we have been pointing out here, estimates have been coming down, with the overall revisions trend remaining negative even after accounting for the persistent favorable trend enjoyed by the Energy sector.
We see this trend of negative estimate revisions at play with the next few quarters as well as with full-year 2023 estimates.
Aggregate S&P 500 earnings outside of the Energy sector have declined -6.9% since mid-April, with double-digit percentage declines in Retail, Construction, Consumer Discretionary, and Tech. Estimates have been coming down in the Industrial Products, Medical and Finance sectors as well.
The Overall Earnings Picture
Please note that a big part of this year’s growth is thanks to the strong momentum in the Energy sector whose earnings are on track to grow +141.0% this year. Excluding this extraordinary Energy sector contribution, earnings growth for the rest of the index would be down -0.1%. This flat earnings picture for this year is also in-line with the economic ground reality.
Earnings next year are expected to be up +6.1% as a whole and +7.9% excluding the Energy sector. This magnitude of growth can hardly be called out-of-sync with a flat or even modestly down economic growth outlook. Don’t forget that headline GDP growth numbers are typically in real or inflation-adjusted terms while S&P 500 earnings discussed here are not.
As mentioned earlier, 2023 aggregate earnings estimates on an ex-Energy basis are already down -6.9% since mid-April. Perhaps we see a bit more downward adjustments to estimates over the coming weeks, after we have seen Q3 results. But we have nevertheless already covered some ground in taking estimates to a fair or appropriate level.
This is particularly so if whatever economic downturn lies ahead proves to be more of the garden-variety rather than the last two such events. Recency bias forces us to use the last two economic downturns, which were also among the nastiest in recent history, as our reference points. But we need to be cautious against that natural tendency as the economy’s foundations at present remain unusually strong.
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%,andv +95.3%. Today you can access their live picks without cost or obligation.
See Stocks Free >>
Follow us on Twitter: https://twitter.com/zacksresearch
Join us on Facebook: https://www.facebook.com/ZacksInvestmentResearch/
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.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
https://www.zacks.com
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.