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Q4 Earnings On Roll, Q4 Productivity Falters

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Ahead of Thursday’s opening bell, we see market futures again wallowing in negative territory, after strong Q4 earnings helped Wednesday trading make back some of the losses from earlier in the week. And, it being Thursday, we see new Initial Jobless Claims from a week ago, plus fresh Q4 Productivity results.

New jobless claims fell to 230K from a downwardly revised 231K the previous week. This is lower than expected, and stays directly within the sweet spot of a healthy U.S. labor market. For the past dozen quarters or so — give or take hurricane effects and other short-term realities — we have seen jobless numbers between 225K-250K, again consistent with robust domestic employment.

Continuing claims remained relatively high, however, at 1.953 million from the previous week. We have not crossed the 2 million continuing claims threshold in quite some time, but the narrative remains: fewer near-term claims and steady longer-term jobless claims have been dominant themes in the jobs market.

Q4 Productivity Lower than Expected

The new preliminary read on Q4 Productivity disappointed, falling to -0.1% from an expected +1.0%. Granted, a pullback from Q3’s stronger 3% — which itself was downwardly revised to 2.7% — was expected, but not into negative territory. Then again, we are looking at a preliminary view of the Q4 tally, so the possibility of an upward revision in future reads is something we’ll be considering in the future.

And as productivity reportedly fell, Unit Labor Costs for Q4 naturally rose — to 2% from the 1% expected. Through 2017, productivity has averaged 1.2% relative to 2016. While it’s good this figure is in positive territory, we again see that productivity and strong job growth in the U.S. (witness ADP’s 234K new private-sector jobs reported for January, following an even better 242K the previous month) not completely aligned.

Again, when the Bureau of Labor Statistics (BLS) releases its non-farm payroll results for January tomorrow morning, we’ll be keying on the Average Wage Growth number, which is expected to continue to go up, albeit very gradually. Aside from the other ways to breakdown these important labor market numbers, analysts have been looking for wage growth to take hold for, literally, years — with little to show for it since jobs figures began to notably improve.

Q4 Earnings Roundup

Due to the monstrous amount of earnings reports coming out both after yesterday’s close and before this morning’s opening bell, we will keep our focus to those stocks with strong Zacks Ranks:

Zacks Rank #1 (Strong Buy)-based United Parcel Service (UPS - Free Report) beat estimates on both its top- and bottom-lines, reaching $1.67 per share (2 cents higher than anticipated) on $18.83 billion in quarterly revenues, which was significantly higher than the $18.19 billion expected. Full-year earnings guidance for 2018 is in a range between $7.03-7.37 per share; the Zacks consensus previously had been for $706 per share. For more on UPS’ earnings, click here.

Marathon Petroleum (MPC - Free Report) , another Zacks Rank #1 stock with a Zacks Style Score (Value, Growth, Momentum) of A, also outperformed in its Q4 report, beating earnings estimates by 5 cents to $1.05 per share, with revenues surpassing estimates to $21.24 billion from the $19.70 billion expected. For more on MPC’s earnings, click here.

Oil & Gas integrated supermajor ConocoPhillips (COP - Free Report)  only managed to meet bottom-line estimates of 45 cents per share, though quarterly revenues were well out in front of expectations — $87.36 billion easily topped the $76.98 billion we had been looking for. Biggest among elements positively affecting the quarter was Conoco’s Refining & Marketing business, which zoomed ahead from $166 million a year ago to $732 million in Q4. For more on COP’s earnings, click here.


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