Back to top

Read MoreHide Full Article

For Immediate Release

Chicago, IL – November 07, 2016 – releases the list of companies likely to issue earnings surprises. This week’s list includesMacy’s (NYSE:(M - Free Report) –Free Report) and Nordstrom (NYSE:(JWN - Free Report) – Free Report).

To see more earnings analysis, visit

Every day, makes their Bull Stock of the Day available, free of charge. To see it, click here .

Q3 Earnings Season: An Inflection Point

The bulk of the Q3 earnings season is now behind us, with results from only 15% of the S&P 500 members still awaited. The Retail sector is the only one at this stage that has a sizable number of reports still to come, particularly from the traditional brick-and-mortar operators like Macy’s (NYSE:(M - Free Report) –Free Report) andNordstrom (NYSE:(JWN - Free Report) – Free Report) that will report this week. In total, we have almost 650 companies reporting Q3 results, including 31 S&P 500 members.

The picture emerging from the Q3 earnings season is one of overall improvement, particularly on the growth front. Earnings growth for the quarter is on track to be in positive territory, the first positive growth for the S&P 500 index after 5 quarters of back-to-back declines. The +3% earnings growth in Q3 (combining the actual results from the 423 index members that have reported already with estimates for the still-to-come 77 companies) is nevertheless a notable improvement over what we saw in the preceding 5 quarters.

Positive growth was expected to show up in the last quarter of the year, with pre-season expectations putting Q3 growth to be in negative territory. In other words, not only has the earnings recession finally come to an end, but positive growth has arrived ahead of schedule. In a way, Q3 can be seen as an inflection point, with the growth trend shifting from negative to positive.

In addition to the growth angle, other favorable aspects of the Q3 earnings season pertaining to more numerous positive surprises and only modest negative revisions to Q4 estimates which have become less notable in recent days. Positive surprises are only modestly tracking above other recent periods and estimates for Q4 have started coming down, though the pace of negative revisions still compares favorably with what we had seen in the comparable periods in other recent reporting cycles.

Q3 Earnings Scorecard (as of 11/04/2016)

We now have Q3 results from 423 S&P 500 members or 84.6% of the index’s total membership that combined account for 87.1% of the index’s total market capitalization. Total earnings for these 423 companies are up +3.6% from the same period last year on +2.4% higher revenues, with 72.8% beating EPS estimates and 55.1% coming ahead of revenue estimates.

The reporting cycle for next week has almost 650 companies reporting results, including 31 S&P 500 members. By the end of this week, we will have seen Q3 results from 90.8% of the index’s total membership.

This is better performance than we have seen from the same group of 423 index members in other recent periods, as the comparison charts below show.

The Energy sector’s growth picture is expected to improve in Q4, but it remains a big drag this earnings season. Excluding the Energy sector, total earnings for the rest index members that have reported are up +7.4% on +4.4% higher revenues.

Q3 is tracking above other recent periods largely on account of more numerous revenue beats.

Is the Improvement All Finance Driven?

For the Finance sector, we now have Q3 results from +88.6% of the sector’s total market cap in the index. Total earnings for these companies are up +12.7% from the same period last year on +6.7% higher revenues, with 73% beating EPS and an equally high 75.3% beating revenue expectations.

This is better performance than we have seen from these Finance sector companies in a while.

Excluding the Finance sector from the aggregate reported picture at this stage, total earnings for the rest of S&P 500 members that have reported results will be up +1.2% on +1.7% higher revenues, with 72.8% beating EPS estimates and 49.7% beating revenue estimates.

The growth picture becomes less notable without the Finance sector, but it is still an improvement over the recent past.

Technology Sector’s Apple Drag

For the Technology sector, we now have Q3 results from 73.8% of the Tech companies in the S&P 500 index that combined account for 86.7% of the sector’s total market cap in the index. Total earnings for these Tech companies are up +5.0% from the same period last year on +2.5% higher revenues, with 82.2% beating EPS estimates and 75.6% beating revenue expectations.

The sector’s Q3 growth pace is nevertheless an improvement over what we have seen from the same group of Tech stocks over the past year. Positive surprises are also more numerous relative to historical periods.

The Tech sector’s growth pace improves even more once Apple’s results are excluded from the aggregate picture. Apple’s Q3 earnings were down -19% from the same period last year on -9% lower revenues. Excluding Apple, total earnings for the rest of the Tech sector companies that have reported would be up +12.3% from the same period last year on +5.3% higher revenues.

The comparison charts below show the sector’s growth pace with and without the Apple drag. As you can see, the sector’s growth picture looks a lot better on an ex-Apple basis.

Q3 Expectations As a Whole

Combining the actual results from the 423 S&P 500 members with estimates from the still-to-come 77 index members, total Q3 earnings are now expected to be up +3.0% from the same period last year on +1.5% higher revenues. This would compare to 2016 Q2 earnings growth of -2.8% on -0.2% revenues.

Expectations Beyond Q3

At the start of the Q3 earnings season, growth was expected to be in negative territory for the 6th quarter in a row, with positive growth expected to resume from Q4 (+3.7%) onwards. But as indicated at the top, growth in Q3 has turned positive already (up +3.0% at present).

The Energy sector drag is expected to end in 2016 Q4 and beyond.

The improved Energy sector outlook makes sense, given shifting comparisons and the improvement in oil prices. But we will have to wait to find out if estimates for the other sectors will hold up as companies report Q3 results and provide guidance for Q4 and beyond.

It will be interesting to see if the decelerated pace of negative revisions that we saw the last earnings season will get repeated this time as well.

Note : Sheraz Mian regularly provides earnings analysis on and appears frequently in the print and electronic media. In addition to this Earnings Preview article, he publishes the Zacks Earnings Trends report every week.

If you want an email notification each time Sheraz publishes a new article, please click here >>>

Zacks "Profit from the Pros" e-mail newsletter offers continuous coverage of the industries and the stocks poised to outperform the market. Click to subscribe to this free newsletter today.

About Zacks is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros.

Get the full Report on M - FREE

Get the full Report on JWN - FREE

Follow us on Twitter:

Join us on Facebook:

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 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. .

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 for information about the performance numbers displayed in this press release.

In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

Macy's, Inc. (M) - free report >>

Nordstrom, Inc. (JWN) - free report >>

More from Zacks Press Releases

You May Like