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What to Watch for in Q1 Earnings Season

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  • (1:00) - What Can Earnings Tell Us About The Banking Industry
  • (9:15) - What Sectors Are Having The Biggest Issues Right Now?
  • (15:30) - What Is Driving The Growth In Consumer Discretionary Sector?
  • (19:00) - Manufacturing Recession: Can We Expect A Rebound Anytime Soon?
  • (21:40) - What Should Investors Expect From AI and Energy Companies?
  • (25:00) - Episode Roundup: BAC, JPM, C, CMA, FRC, META, TOL, XOM, CVX


Welcome to Episode #355 of the Zacks Market Edge Podcast.

Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.

This week, Tracey is joined by Sheraz Mian, Zacks Director of Research and earnings guru, to discuss the upcoming Q1 earnings season.

What to Watch in Q1 Earnings Season

Earnings for the S&P 500 are expected to fall 9.7% year-over-year in the first quarter. But there are pockets of strength, including technology and consumer discretionary, where estimates had come down in 2022 and are now rebounding.

Conversely, some sectors are in the opposite situation, like energy, which saw rising earnings estimates last year as crude and natural gas prices soared, but are now seeing earnings cuts. It’s one sector on the down trend.

Additionally, the banking crisis happened in the first quarter. Is that impacting the outlook for the banks in 2023?

What should investors be watching this earnings season?

5 Stocks to Watch in Q1 Earnings Season

1.      Bank of America (BAC - Free Report)

Bank of America shares have fallen 16.5% year-to-date. It wasn’t supposed to be like this as bank earnings were expected to be one of the few industries to see rising earnings in 2023.

However, after the banking crisis, the analysts have been re-evaluating. 1 estimate on Bank of America has been cut in the last week. The Zacks Consensus has fallen to $3.35 from $3.38 during that time. Earnings are still expected to rise 5% in 2023. But the Street is nervous that this estimate will fall further.

Bank of America is cheaply valued, with a price-to-book ratio of just 0.94. A P/B ratio around 1.0 is considered to be cheap for a bank.

Is Bank of America oversold?

2.      Comerica Inc. (CMA - Free Report)

Comerica is a Texas regional bank with operations in several states including Texas and Michigan. Shares of Comerica have fallen 40% year-to-date.

2 estimates have been cut in the last week for 2023, pushing down the Zacks Consensus Estimate to $9.39 from $9.58 in the last 30 days. However, last April, analysts expected just $9.04 and in Sep 2022, they were looking for $10.42. It’s also still 10.9% above 2022’s earnings.

Comerica trades with a forward P/E of just 4.5. After the sell-off, it’s dividend is yielding 6.7%.

Is Comerica on your watch list this earnings season?

3.      Meta Platforms (META - Free Report)

Meta Platforms was sold off in 2022 but the shares have rebounded in 2023, gaining 75.7% year-to-date.

Earnings estimates have also rebounded. Over the last week, one estimate has been raised on Meta Platforms ahead of its upcoming earnings report on Apr 26, 2023. The Zacks Consensus Estimate has jumped to $10.23 from $7.59 in the last 90 days.

That’s a dramatic change in sentiment by the analysts. It’s not a surprise it’s a Zacks Rank #1 (Strong Buy) with that turnaround in the earnings sentiment. However, for the year, it’s earnings growth of just 4% as Meta Platforms made $9.83 last year.

Meta Platforms is trading with a forward P/E of 21.

Should investors still dive into Meta Platforms?

4.      Exxon Mobil Corp. (XOM - Free Report)

Exxon Mobil was a top performer in 2022, gaining 73%. However, in the first quarter of 2023, the energy sector was the worst performing sector. But with OPEC+ production cuts, and WTI back at $80, the shares are now up 6.1% on the year.

Analysts have been bearish on earnings for 2023 as crude prices have fallen. One estimate has been cut in the last week, pushing Exxon Mobil’s Zacks Consensus Estimate down to $9.84 from $10.73 in the last 90 days.

That’s down 30% from 2022, when Exxon Mobil made $14.06 per share.

Exxon Mobil is still cheap, with a forward P/E of 11.7.

Should Exxon Mobil be back on your short list?

5.      Chevron Corp. (CVX - Free Report)

Chevron was also among the best performing stocks in 2022. Shares were up 49.5% last year. But in 2023, it has fallen 5.4%.

Analysts have been bearish about earnings, after a strong 2023. 2 estimates for 2023 have been cut in the last 30 days, pushing the Zacks Consensus down to $14.56 from $16.65 in the last 3 months. That’s a decline of 23% from last year when Chevron made $18.83.

Chevron is shareholder friendly and pays a dividend currently yielding 3.6%. The stock is cheap, with a forward P/E of 11.6.

Is it time to get into Chevron again?

What else do you Need to Know About the Q1 Earnings Season?   

Listen to this week’s podcast to find out.

[In full disclosure, Tracey owns BAC in the Zacks Value Investor portfolio.]


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