For Immediate Release
Chicago, IL – Oct 23, 2017 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Halliburton, Schlumberger, McDonald’s, Caterpillar and DuPont.
To see more earnings analysis, visit https://at.zacks.com/?id=3207.
3 Takeaways from Q3 Earnings Season
We are in the thick of the Q3 earnings season now, with more than 700 companies on deck to release results this week, including 180 S&P 500 members. With results from 87 S&P 500 members already out, as of Friday, October 20th, we will have crossed the halfway mark by the end of this week.
The results thus far provide a positive and reassuring view of corporate earnings, which will most likely get strengthened and reconfirmed through the remainder of this reporting cycle. Here are the three positives that we can glean either from the results that have come out already or can reasonably be expected to transpire in the coming days.
First, there is clear momentum on the revenue front, with growth notably accelerating from other recent periods. Total revenues for the 87 S&P 500 members that have reported results already are up +7.3% from the same period last year, which compares to +4.4% top-line growth for the same group of companies in the preceding quarter and still lower average growth rates in the prior periods.
Second, the above-average proportion of positive surprises that we saw in the preceding period has continued this earnings season as well. We typically don’t give positive surprises a lot of weight in evaluating or assessing an earnings season since we all know that management teams are experts in managing expectations. Even then, the trend emerging in the Q3 earnings season is noteworthy for two reasons. First, estimates for the quarter had not fallen by as much as had historically been the case. Second, the proportion of positive revenue surprises, a much harder variable to manipulate relative to earnings, is only a shade below the preceding quarter’s record level.
Third, the revisions trend for the December quarter is shaping up to be unusually favorable. The pattern over the last few years has been that as the quarterly earnings reporting season gets underway, estimates for the following quarter start coming down. Over the last few quarters, estimates would not fall by as much as was historically the case, but they were nevertheless coming down.
The unusual thing about the Q4 estimates is that they have actually gone up a bit over the last couple of weeks. This will most likely change as more companies report Q3 results and manage the market’s expectations for the December quarter, but it is nevertheless an unusually positive development.
Q3 Earnings Season Scorecard (as of Friday, October 20, 2017)
We now have Q3 results from 87 S&P 500 members that combined account for 24.7% of the index’s total market capitalization. Total earnings for these companies are up +9.4% from the same period last year on +7.3% higher revenues, with 71.3% beating EPS estimates and 70.1% beating revenue estimates.
The earnings and revenue growth pace is accelerating from what we had been seeing in the recent past, with the momentum on the revenue side particularly notable, as pointed out earlier.
This Week’s Key Earnings Releases
The reporting cycle really starts ramping up this week, with 722 companies reporting results, including 180 S&P 500 members.
Monday (10/23): Halliburton is notable among the 10 S&P 500 members coming out with results on Monday, which will be interesting following Schlumberger’s comments about moderating North American oilfield activity levels. Halliburton’s very high level of North American exposure will make its take on the region’s outlook particularly important.
Tuesday (10/24): On a very busy reporting docket with 40 S&P 500 members reporting results (21 before the market’s open), the notable reports are from McDonald’s, Caterpillar,DuPont,and others.
About the Zacks Rank
Since 1988, the Zacks Rank has proven that "Earnings estimate revisions are the most powerful force impacting stock prices." Since inception in 1988, #1 Rank stocks have generated an average annual return of +28%. During the 2000-2002 bear market, Zacks #1 Rank stocks gained +43.8%, while the S&P 500 tumbled -37.6%. Also note that the Zacks Rank system has just as many Strong Sell recommendations (Rank #5) as Strong Buy recommendations (Rank #1). Since 1988, Zacks Rank #5 stocks have significantly underperformed the S&P 500 (+3% versus +10%). Thus, the Zacks Rank system allows investors to truly manage portfolio trading effectively.
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