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FedEx, Adobe, Nike and Costco are part of Zacks Earnings Preview

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For Immediate Release

Chicago, IL – September 25, 2023 – releases the list of companies likely to issue earnings surprises. This week’s list includes FedEx (FDX - Free Report) , Adobe (ADBE - Free Report) , Nike (NKE - Free Report) and Costco (COST - Free Report) .

Analyzing the Fed's Current Earnings Expectations

The market's reaction to the 'higher-for-longer' view of interest rates following the latest Fed dot plot suggests that many had been banking on a relatively earlier onset to the easing cycle than the central bank's guidance.

We see the seemingly hawkish Fed posture as nothing more than an insurance policy for the central bank that will come in handy should the recent favorable momentum on the inflation front start stalling.

It is prudent on the Fed's part to have complete confidence on the inflation question before changing course, though we remain of the view that the enduring trend on the inflation front remains favorable even as the macroeconomic backdrop remains far more resilient relative to earlier expectations.

The economy's resilience has been showing up in the positive turn in the earnings outlook that we have been flagging in this space in recent months. Specifically, the earnings estimates revisions trend notably stabilized in early April this year after steadily decreasing for almost a year.

Had it not been for the Energy sector weakness, aggregate earnings estimates would be modestly up since early April 2023.

Sectors enjoying positive estimate revisions in this time period include Tech, Construction, Autos, Consumer Discretionary, Industrial Products, and Retail.

We are seeing a similar revisions trend at play concerning estimates for 2023 Q3, whose advanced results have started coming out already.

The expectation currently is of S&P 500 earnings declining by -1.8% in Q3 from the same period last year on +0.8% higher revenues. This would follow the -7.1% decline on +1.1% higher revenues in 2023 Q2.

2023 Q3 is expected to be the last period of declining earnings for the index, with positive growth resuming from 2023 Q4 onwards. In fact, had it not been for the Energy sector drag, earnings growth in 2023 Q3 would be positive.

Q3 is currently expected to be the 7th quarter in a row of declining margins.

Excluding the Energy sector, however, net margins would be modestly up from the year-earlier period.

One sector that has made significant progress on the margins front is the Tech sector, whose year-over-year comparison turned positive in the preceding period and is expected to expand further this quarter.

Look at current expectations for next year and the year after to understand the disconnect between the reality of current bottom-up aggregate earnings estimates and the seemingly never-ending worries about an impending economic downturn. That said, most economic analysts have been steadily lowering their recessionary odds in recent months.

This Week's Notable Earnings Releases

The Q3 earnings season will really get going when the big banks start coming out with their quarterly numbers in mid-October. But the reporting cycle has actually gotten underway already, with results from 8 S&P 500 members out as of Friday, September 22nd.

These 8 S&P 500 members include bellwethers like FedEx, Adobe and others. We have another 8 S&P 500 members on deck to report results this week, including Nike, Costco and others.

FedEx, Adobe, Nike, and all of these other early reporters are coming out with their fiscal August-quarter results, which we and other research organizations count as part of the Q3 tally. We will have seen roughly two dozen such August-quarter results by the time JPMorgan comes out with its quarterly results on October 13th.

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