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Zacks Earnings Trends Highlights: Target, Walmart and Lowe's
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For Immediate Release
Chicago, IL – December 1, 2022 – Zacks Director of Research Sheraz Mian says, "Excluding contributions from the Energy sector, Q3 earnings for the rest of the index would be -5.9% below the year-earlier level."
Evaluation Further Downside Risk to Earnings Estimates
Note: The following is an excerpt from this week'sEarnings 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:
· For the 469 S&P 500 members that have reported Q3 results already, total earnings are up +2.2% from the same period last year on +11.9% higher revenues, with 69.1% beating EPS estimates and 67.8% beating revenue estimates.
· Looking at 2022 Q3 as a whole, total S&P 500 earnings are currently expected to be up +1.5% from the same period last year on +11.6% higher revenues. Excluding contributions from the Energy sector, Q3 earnings for the rest of the index would be -5.9% below the year-earlier level.
· Looking at the calendar-year picture, total S&P 500 earnings are expected to be up +4.9% in 2022 and +3.1% in 2023. On an ex-Energy basis, total 2022 index earnings would be down -2.1% (instead of +4.9%, with Energy).
· Full year 2023 earnings estimates have been coming down after peaking in mid-April, with the aggregate total down -8.4% from the peak for the index as a whole and -11.3% on an ex-Energy basis.
As the Q3 earnings season enters its final phase, we continue to see the overall earnings picture as more stable and resilient than many were willing to acknowledge ahead of the start of this reporting cycle. We are not suggesting that corporate earnings are great, but they aren't bad either.
Many in the market feared an earnings cliff that would force management teams across many industries to provide downbeat guidance. We got some of those downbeat reports, with Target (TGT - Free Report) as the latest to come out with disappointing results and guidance. But we also had Walmart (WMT - Free Report) and Lowe's (LOW - Free Report) which impressed Wall Street.
Not much growth was expected given where we are in the economic cycle. But the actual growth coming through the results is ever so slightly better than expected. It is this performance relative to expectations rather than the absolute level of earnings or the growth pace that is of relevance to the market.
Looking at expectations for 2022 Q4 and beyond, they are getting reset lower, as we have been pointing out for a while now. Analysts have been steadily cutting their estimates for some time. We saw this in the run up to the start of the Q3 earnings season and the trend continues with respect to estimates for the current period (2022 Q4) and full-year 2023.
As we have consistently been pointing out, aggregate S&P 500 earnings outside of the Energy sector peaked in mid-April and have been steadily trending down ever since. In fact, S&P 500 earnings estimates in the aggregate outside of the Energy sector have declined more than -11% since mid-April, with much bigger declines in Retail, Construction, Consumer Discretionary, Tech, Industrial Products and the Aerospace sectors. On the whole, estimates are down for 13 of the 16 Zacks sectors.
The Overall Earnings Picture
Earnings next year are expected to be up only +3.1%. 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 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 by more than -11% 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%, 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/performancefor information about the performance numbers displayed in this press release.
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Zacks Earnings Trends Highlights: Target, Walmart and Lowe's
For Immediate Release
Chicago, IL – December 1, 2022 – Zacks Director of Research Sheraz Mian says, "Excluding contributions from the Energy sector, Q3 earnings for the rest of the index would be -5.9% below the year-earlier level."
Evaluation Further Downside Risk to Earnings Estimates
Note: The following is an excerpt from this week'sEarnings 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:
· For the 469 S&P 500 members that have reported Q3 results already, total earnings are up +2.2% from the same period last year on +11.9% higher revenues, with 69.1% beating EPS estimates and 67.8% beating revenue estimates.
· Looking at 2022 Q3 as a whole, total S&P 500 earnings are currently expected to be up +1.5% from the same period last year on +11.6% higher revenues. Excluding contributions from the Energy sector, Q3 earnings for the rest of the index would be -5.9% below the year-earlier level.
· Looking at the calendar-year picture, total S&P 500 earnings are expected to be up +4.9% in 2022 and +3.1% in 2023. On an ex-Energy basis, total 2022 index earnings would be down -2.1% (instead of +4.9%, with Energy).
· Full year 2023 earnings estimates have been coming down after peaking in mid-April, with the aggregate total down -8.4% from the peak for the index as a whole and -11.3% on an ex-Energy basis.
As the Q3 earnings season enters its final phase, we continue to see the overall earnings picture as more stable and resilient than many were willing to acknowledge ahead of the start of this reporting cycle. We are not suggesting that corporate earnings are great, but they aren't bad either.
Many in the market feared an earnings cliff that would force management teams across many industries to provide downbeat guidance. We got some of those downbeat reports, with Target (TGT - Free Report) as the latest to come out with disappointing results and guidance. But we also had Walmart (WMT - Free Report) and Lowe's (LOW - Free Report) which impressed Wall Street.
Not much growth was expected given where we are in the economic cycle. But the actual growth coming through the results is ever so slightly better than expected. It is this performance relative to expectations rather than the absolute level of earnings or the growth pace that is of relevance to the market.
Looking at expectations for 2022 Q4 and beyond, they are getting reset lower, as we have been pointing out for a while now. Analysts have been steadily cutting their estimates for some time. We saw this in the run up to the start of the Q3 earnings season and the trend continues with respect to estimates for the current period (2022 Q4) and full-year 2023.
As we have consistently been pointing out, aggregate S&P 500 earnings outside of the Energy sector peaked in mid-April and have been steadily trending down ever since. In fact, S&P 500 earnings estimates in the aggregate outside of the Energy sector have declined more than -11% since mid-April, with much bigger declines in Retail, Construction, Consumer Discretionary, Tech, Industrial Products and the Aerospace sectors. On the whole, estimates are down for 13 of the 16 Zacks sectors.
The Overall Earnings Picture
Earnings next year are expected to be up only +3.1%. 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 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 by more than -11% 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%, and +95.3%. Today you can access their live picks without cost or obligation.
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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.