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Zacks Earnings Trends Highlights: KB Home, Amazon and Microsoft
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For Immediate Release
Chicago, IL – May 11, 2023– Zacks Director of Research Sheraz Mian says, "Earnings estimates for full-year 2023 appear to have reversed course lately after consistently coming down for almost a year since the April 2022 peak."
Analyzing Recent Earning Estimate Revisions
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 picture emerging from the Q1 earnings season continues to be one of resilience and stability, with companies not only beating estimates but also providing a good-enough outlook in an uncertain macro environment. This is helping the revision trend to turn positive after remaining negative for nearly a year.
Through the morning session of May 10th, we have seen Q1 results from 452 S&P 500 members, or 90.4% of the index's membership. Total Q1 earnings for these 452 index members are down -4% on +4.5% higher revenues, with 77.2% beating EPS estimates and 75% beating revenue estimates.
Earnings aren't great, but they aren't bad either, given the uncertain macro backdrop and weak sentiment. Importantly, the tone and substance of management commentary continue to be favorable enough, helping keep negative estimate revisions in check.
Earnings estimates for full-year 2023 appear to have reversed course lately after consistently coming down for almost a year since the April 2022 peak.
As we have been pointing out in this space in recent weeks, corporate profits continue to defy the skeptics, with an above-average proportion of the companies not only beating estimates but also providing reassuring enough guidance for the current coming quarters.
We are not suggesting that earnings are great, because they are not. After all, earnings growth is on track to be negative for the second quarter in a row, with declining profits expected to continue in the current period.
That said, the fear of all-around downbeat guidance and management commentary still remains just that, a fear. As a result, we continue to elude the earnings cliff that the market bears have been telling us for a while.
Perhaps it's only a question of time, with the day of reckoning only being deferred to the second half of the year. But for now, at least, we can feel relieved that the earnings picture is good enough.
There are so many examples of bellwether companies showing that while growth has come down and conditions remain challenging, they are still profitably operating. Consumers are still spending, though there are signs of weakness at the margin.
The Q1 earnings season appears to have caused stabilization in the earnings estimate revisions trend that was consistently negative for almost a year. In fact, since the start of 2023 Q2 in April, full-year 2023 earnings estimates in the aggregate have actually modestly increased, with estimates for 10 of the 16 Zacks sectors slightly up in that period.
The favorable reversal in the revisions trend is particularly notable for the Construction, Industrial Products, Retail, and Technology sectors. You can see this in the revisions trend for a few bellwether players for these sectors, like KB Home (KBH - Free Report) on the Construction side, Amazon (AMZN - Free Report) for Retail, and Microsoft (MSFT - Free Report) for the Tech sector.
For example, Amazon's Zacks Consensus EPS of $1.54 for 2023 is up from $1.34 on March 31st. KB Home is currently expected to bring $5.14 per share, which is up from $4.97 per share on March 31st. Similarly, the $9.61 per share Microsoft is expected to bring in this year today is up from $9.34 per share on March 31st.
It is important to note that while earnings estimates for KB Home, Amazon, and Microsoft have increased lately, they are still down significantly relative to what was expected a year ago.
It is hard to know how enduring or otherwise this favorable recent turn in the revisions trend will prove to be, but it is nevertheless a positive development.
The Earnings Big Picture
As we have pointed out all along, aggregate earnings estimates for 2023 peaked in April last year and consistently came down since then. Even accounting for the aforementioned positive revisions trend in recent weeks, aggregate 2023 earnings estimates have declined by -12.5% since the April 2022 peak and -14.1% on an ex-Energy basis.
It's difficult to tell at this stage if the revisions trend will remain on its recent positive trajectory or revert back to its original negative trend. But it is nevertheless a market-friendly development.
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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.
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Zacks Earnings Trends Highlights: KB Home, Amazon and Microsoft
For Immediate Release
Chicago, IL – May 11, 2023– Zacks Director of Research Sheraz Mian says, "Earnings estimates for full-year 2023 appear to have reversed course lately after consistently coming down for almost a year since the April 2022 peak."
Analyzing Recent Earning Estimate Revisions
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:
As we have been pointing out in this space in recent weeks, corporate profits continue to defy the skeptics, with an above-average proportion of the companies not only beating estimates but also providing reassuring enough guidance for the current coming quarters.
We are not suggesting that earnings are great, because they are not. After all, earnings growth is on track to be negative for the second quarter in a row, with declining profits expected to continue in the current period.
That said, the fear of all-around downbeat guidance and management commentary still remains just that, a fear. As a result, we continue to elude the earnings cliff that the market bears have been telling us for a while.
Perhaps it's only a question of time, with the day of reckoning only being deferred to the second half of the year. But for now, at least, we can feel relieved that the earnings picture is good enough.
There are so many examples of bellwether companies showing that while growth has come down and conditions remain challenging, they are still profitably operating. Consumers are still spending, though there are signs of weakness at the margin.
The Q1 earnings season appears to have caused stabilization in the earnings estimate revisions trend that was consistently negative for almost a year. In fact, since the start of 2023 Q2 in April, full-year 2023 earnings estimates in the aggregate have actually modestly increased, with estimates for 10 of the 16 Zacks sectors slightly up in that period.
The favorable reversal in the revisions trend is particularly notable for the Construction, Industrial Products, Retail, and Technology sectors. You can see this in the revisions trend for a few bellwether players for these sectors, like KB Home (KBH - Free Report) on the Construction side, Amazon (AMZN - Free Report) for Retail, and Microsoft (MSFT - Free Report) for the Tech sector.
For example, Amazon's Zacks Consensus EPS of $1.54 for 2023 is up from $1.34 on March 31st. KB Home is currently expected to bring $5.14 per share, which is up from $4.97 per share on March 31st. Similarly, the $9.61 per share Microsoft is expected to bring in this year today is up from $9.34 per share on March 31st.
It is important to note that while earnings estimates for KB Home, Amazon, and Microsoft have increased lately, they are still down significantly relative to what was expected a year ago.
It is hard to know how enduring or otherwise this favorable recent turn in the revisions trend will prove to be, but it is nevertheless a positive development.
The Earnings Big Picture
As we have pointed out all along, aggregate earnings estimates for 2023 peaked in April last year and consistently came down since then. Even accounting for the aforementioned positive revisions trend in recent weeks, aggregate 2023 earnings estimates have declined by -12.5% since the April 2022 peak and -14.1% on an ex-Energy basis.
It's difficult to tell at this stage if the revisions trend will remain on its recent positive trajectory or revert back to its original negative trend. But it is nevertheless a market-friendly development.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. 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.