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Zacks Earnings Trends Highlights: Dollar General and Target

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For Immediate Release

Chicago, IL – June 1, 2018 – Zacks Director of Research Sheraz Mian says, “While growth is tracking notably above historical periods, the proportion of positive EPS surprises is in-line with historical periods and revenue surprises are tracking below the 4-quarter average.”

Earnings Picture Good, but Not Improving

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:

•    Retail sector results show strong growth, but a smaller proportion of retailers are beating EPS and revenue estimates relative to other recent periods.

•    With results from 98.5% of the Retail sector’s market cap in the S&P 500 out, earnings and revenue growth is on track to be notably above other historical periods, though positive EPS and revenue surprises are not as numerous as had been the trend in other recent periods.

•    For the 493 S&P 500 members that have reported Q1 results already, total earnings are up +24.3% from the same period last year on +8.7% higher revenues, with 76.9% beating EPS estimates and 74.4% beating revenue estimates. The earnings season has ended for 11 of the 16 Zacks sectors.

•    Except for the proportion of these 493 index members beating EPS and revenue estimates, which are tracking roughly in-line with the preceding quarter’s level, growth in Q1 is notably tracking above historical periods.

•    Looking at Q1 as a whole, total earnings are expected to be up +24.2% from the same period last year on +8.6% higher revenues, the highest quarterly earnings growth pace in 7 years. Net Income margins for the quarter are on track to expand by 1.5 percentage points, with the strongest gains in the Finance, Technology and Energy sectors.
•    Q1 Earnings growth is in double-digit territory from the year-earlier level for 13 of the 16 Zacks sectors, including the Technology and Finance sectors. The Auto sector has the weakest growth of all 16 sectors, with +0.3% earnings growth on +1.4% higher revenues.

•    Energy sector earnings increased +75.7% from the same period last year on +14.2% higher revenues. Excluding the Energy sector, total S&P 500 earnings growth drops from +24.3% to +22.6%.

•    For the small-cap S&P 600 index, we now have Q1 results from 94.3% of the index’s total membership. Total earnings for these companies are up +25.2% on +9.4% higher revenues, with 55.6% beating EPS estimates and 72.1% beating revenue estimates. In addition to earnings and revenue growth, revenue surprises are notably tracking above historical periods for the small caps.

•    For the quarter as whole, total S&P 600 earnings are expected to be up +20.7% on +9% higher revenues. We have more details about small-cap data on page 28 of the full report.

•    For full-year 2018, total earnings for the S&P 500 index are expected to be up +19.6% on +5.9% higher revenues. For full-years 2019 and 2020, earnings are expected to be up +9.6% and +9.7%, respectively. Revenues for the index are expected to be increase by +4.5% in each of the two years.

•    The implied ‘EPS’ for the index, calculated using current 2018 P/E of 17.4X and index close, as of May 30th, is $156.35. Using the same methodology, the index ‘EPS’ works out to $171.29 for 2019 (P/E of 15.9X) and $187.87 for 2020 (P/E of 14.5X). The multiples for 2018 and 2019 have been calculated using the index’s total market cap and aggregate bottom-up earnings for each year.   

Retail Sector Scorecard

With results from Dollar General (DG - Free Report) , Target (TGT - Free Report) and other traditional retailers out now, we have Q1 results from the equivalent of 98.5% of the sector’s market capitalization in the in the S&P 500 index. Total earnings for these Retail sector companies that have reported results are up +21.3% from the same period last year on +9.3% higher revenues, with 69.4% beating EPS estimates and 63.9% beating revenue estimates.

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