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Zacks Earnings Trends Highlights: JPMorgan, Wells Fargo and Citigroup

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For Immediate Release

Chicago, IL – July 6, 2018 – Zacks Director of Research Sheraz Mian says, “For the S&P 500 index as a whole, total Q2 earnings are expected to be up +19% from the same period last year on +8.1% higher revenues, with 11 of the 16 Zacks sectors expected to have double-digit earnings growth.”

Q2 Earnings Season Preview

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:

•    Total earnings for the 20 S&P 500 members that have reported fiscal May-quarter results (part of our Q2 tally) are up +32.3% on +13.6% higher revenues. The proportion of these early reporters beating EPS and revenue estimates is tracking above other recent periods.  

•    For the S&P 500 index as a whole, total Q2 earnings are expected to be up +19% from the same period last year on +8.1% higher revenues, with 11 of the 16 Zacks sectors expected to have double-digit earnings growth.

•    Earnings growth in the last earnings season (20018 Q1) reached its highest level in more than 7 years at +24.6% on +8.7% revenue gains.

•    Q2 estimates moved up modestly since the quarter got underway, in contrast to the very strong positive revisions trend we saw ahead of the start of the start of the Q1 earnings season.

•    Q2 estimates for the Energy, Construction, Basic Materials and Tech sectors went up since the quarter got underway, while estimates for the Consumer Discretionary, Consumer Staples, Autos, Finance, and Conglomerate sectors went down.

•    Tech sector earnings are expected to be up +23.8% on +10.7% higher revenues, which would follow +31.1% earnings growth on +13.1% revenue growth in Q1. Finance sector earnings are expected to be up +18.5% from the same period last year on +3.8% higher revenues.

•    Other major sectors with strong expected growth in Q2 include Energy (+138.2% earnings growth), Basic Materials (+54%), Industrial Products (+24.5%) and Retail (+18.3%). The Autos and Conglomerates sectors are the only ones expected to have lower Q2 earnings compared to the year-earlier level.

•    For the small-cap S&P 600 index, total Q2 earnings are expected to be up +26.4% on +8.1% higher revenues, which would follow +24.4% earnings growth on +8.4% revenue growth in 2018 Q1.

•    For full-year 2018, total earnings for the S&P 500 index are expected to be up +20.2% on +6.1% higher revenues. For full-years 2019 and 2020, total earnings are expected to be up +9.8% and +9.7%, respectively. Revenues for the index are expected to be increase by +4.6% in 2019, and 2020.

•    The implied ‘EPS’ for the index, calculated using current 2018 P/E of 17.6X and index close, as of July 3rd, is $156.50. Using the same methodology, the index ‘EPS’ works out to $171.77 for 2019 (P/E of 16X) and $188.44 for 2020 (P/E of 14.6X). The multiples for 2018, 2019 and 2020 have been calculated using the index’s total market cap and aggregate bottom-up earnings for each year.   

Q2 Earnings Season Gets Underway

The Q2 earnings season will really get going with the July 13th releases from JPMorgan (JPM - Free Report) , Wells Fargo (WFC - Free Report) and Citigroup (C - Free Report) . But the Q2 earnings season has actually gotten underway already, with results from 20 S&P 500 members already out. All of these early results are from companies with fiscal quarters ending in May, but they form part of our June-quarter tally. We will have seen such Q2 results from almost two dozen S&P 500 members with fiscal quarters ending in May by the time the big banks come out with results.

Total earnings for these 20 index members are up +32.3% on +13.6% higher revenues, with 90% beating both EPS estimates and revenue estimates.

It is premature to draw any firm conclusions from this small sample of Q2 results, but two trends nevertheless stand out when we compare the Q2 results from these 20 index members with what these same companies reported in other recent periods.

Note: Sheraz Mian manages the Zacks equity research department. He is an acknowledged earnings expert whose commentaries and analyses appear on 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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