For Immediate Release
Chicago, IL – August 03, 2017 – Zacks Director of Research Sheraz Mian says, “The proportion of companies beating estimates, particularly revenue estimates, is notably tracking above other periods.”
No Shortage of Revenue Surprises This Earnings Season
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:
• With results from 350 S&P 500 members already out, total earnings are up +11% from the same period last year on +5.9% higher revenues, with 74% beating EPS estimates and 68% beating revenue estimates.
• While growth is a bit on the lighter side relative to the preceding period for these 350 index members, the proportion of companies beating estimates, particularly revenue estimates, is notably tracking above other periods.
• The fact that companies are easily beating Q2 estimates even though estimates hadn’t fallen by that much ahead of the start of this earnings season, as had historically been the case, is a notable positive that needs to be acknowledged.
• For Q2 as a whole, combining the actual results with estimates for the still-to-come companies, total earnings are expected to be up +9.7% from the same period last year on +5.4% higher revenues. This would be coming after +13.6% earnings growth on +7% higher revenues in Q1.
• While the Q2 earnings growth pace represents a deceleration from the prior-quarter’s level, total earnings for the quarter are on track to reach a new all-time quarterly record.
• The Q2 growth is broad-based and not concentrated in one or two sectors. The strongest growth in Q2 is from the Energy, Technology, Aerospace, Construction, Finance, Business Services, and Industrial Products sectors. Q2 earnings growth would fall to +7.3% on +4.2% higher revenues on an ex-Energy basis.
• Beyond Q2, total earnings for the S&P 500 index are currently expected to grow by +4.5% on +4.6% higher revenues in the September quarter and +8.9% on +5.5% higher revenues in Q4. Estimates for the September quarter have started coming down, but they appear to be following the moderate revisions pace we saw ahead of the start of the Q2 earnings season, at least at this stage.
• For full-year 2017, total earnings for the index are expected to be up +7.9% on +4.5% higher revenues, which would follow +0.8% earnings growth on +2.1% higher revenues in 2016. Index earnings are expected to be up +10.9% in 2018 and +8.6% in 2019.
Q2 Earnings Season Scorecard (as of August 2nd, 2017)
We now have Q2 results from 350 S&P 500 members that combined account for 79.3% of the index’s total market capitalization. Total earnings for these 350 index members are up +11% from the same period last year on +5.9% higher revenues, with 74% beating EPS estimates and 68% beating revenue estimates. The proportion of companies beating both EPS and revenue estimates is an above-average 55.1%.
The earnings and revenue growth pace is tracking modestly below what we saw from the same group of companies in the preceding period. But the proportion of positive surprises, particularly revenue surprise is notably tracking above historical periods.
While overall Q2 growth is tracking below the pace of the preceding period, growth is accelerating for the Technology sector where Apple (NASDAQ:(AAPL - Free Report) – Free Report) became the latest operator to come out with results that beat estimates and represent notable year-over-year gains. Total earnings for the 82.6% of the sector companies that have reported results are up +17.4% from the same period last year +8% higher revenues, with 85.3% beating EPS estimates and 88.6% beating revenue estimates.
This is an improvement over what we have seen form the same group of Tech companies in other recent periods, including the preceding quarter when the sector’s results were very strong.
Looking at Q2 as a whole, combining the actual results from the 350 index members with estimates for the still-to-come 150 companies, total earnings are expected to be up +9.7% on +5.4% higher revenues. This would follow +13.6% earnings growth on +7% higher revenue growth in 2017 Q1.
Note: Sheraz Mian manages the Zacks equity research department. He is an acknowledged earnings expert whose commentaries and analyses appear on Zacks.com and in the print and electronic media. His weekly earnings related articles include Earnings Trends and Earnings Preview. He manages the Zacks Top 10 and Focus List portfolios and writes the Weekly Market Analysis article for Zacks Premium subscribers.
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