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AutoZone, Adobe, Costco, FedEx and Oracle are part of Zacks Earnings Preview
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For Immediate Release
Chicago, IL – December 17, 2018 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes AutoZone (AZO - Free Report) , Adobe Systems (ADBE - Free Report) , Costco (COST - Free Report) , FedEx (FDX - Free Report) and Oracle (ORCL - Free Report) .
How Low Can Earnings Estimates Go?
All of us knew that the roughly +25% earnings growth pace in the first three quarters of 2018 was unsustainable, with the pace trending down in a major way starting 2018 Q4 and continuing to decelerate in 2019. All of this has been part of consensus earnings expectations for quite some time and primarily a function of the tax cut arithmetic.
But this deceleration in earnings growth is not the only development on the corporate earnings front as the market’s evolving economic growth expectations, for the U.S. as well as the global economy, has raised legitimate concerns about consensus earnings estimates. This earnings uncertainty compounds the market’s pre-existing worries about Fed policy and global trade. The market’s ongoing weakness, which is contrary to its typical behavior at this time of the year, reflects this confluence of headwinds.
Earnings estimates for 2018 Q4 and full-year 2019 have been coming down lately, but they likely have more to go down given the headwinds.
Q4 estimates have come down for 15 of the 16 Zacks sectors, with the Transportation sector the only one that has experienced positive estimate revisions, which is a reflection of the pullback in fuel expenses. Estimates have come down the most for the Conglomerates, Construction, Consumer Discretionary, Utilities and Basic Materials sectors.
This type of negative revisions is not unusual in historical terms, though they do represent greater estimate cuts than was the trend in the last few quarters. Please note that the negative revisions trend isn’t restricted to Q4 estimates, as expectations for full-year 2019 have started coming down in a meaningful way lately as well.
The S&P 500 index is now in negative territory while the Nasdaq Composite is still holding onto a modest gain for the year. Keep in mind that the pronounced downtrend in the market in early October coincides with the downtrend in earnings estimates.
It hard to envision stocks stabilizing if the market’s collective earnings outlook for 2019 continues to deteriorate. And to get stability in earnings outlook, we need clarity and visibility on the interconnected economic growth and tariff fronts. In other words, there is likely further downside to consensus expectations for full-year 2019.
Q4 Earnings Season Gets Underway
The Q4 earnings season will not take the spotlight at least through the middle of January, but the reporting season officially got underway with the December 4th AutoZone report, followed by the December 13th reports from Adobe Systems and Costco. All three of these companies reported results for their fiscal November-quarter results, which we count as part of the December-quarter tally. We have 14 index members on deck to report results this week, including FedEx, Oracle and others.
Total Q4 earnings are expected to be up +12.3% from the same period last year on +5.7% higher revenues, which would follow the +25.6% earnings growth on +8.4% higher revenues in 2018 Q3.
Earnings growth is expected to be in double digits for 6 of the 16 Zacks sectors, with Energy (+77.4% growth), Finance (+22%), Construction (+26.6%) and Transportation (+23.6%) has the strongest growth. Tech sector earnings are expected to decelerate meaningfully in Q4, up +6.7%, after back-to-back quarters of very strong growth.
Four sectors are expected to have lower earnings in Q4 relative to the year-earlier period, namely Conglomerates (-12.9% decline), Autos (-13.5%), Utilities (-6.3%) and Consumer Staples (-0.4%).
Whether we look at the growth picture on a quarterly basis or on a rolling quarter basis, there is no doubt that growth peak is now behind us. The question now is how much estimates for the coming quarters have still to come down. And the answer to that question will depend on the evolving economic backdrop that we discussed at the start.
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 TrendsandEarnings Preview.
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Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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AutoZone, Adobe, Costco, FedEx and Oracle are part of Zacks Earnings Preview
For Immediate Release
Chicago, IL – December 17, 2018 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes AutoZone (AZO - Free Report) , Adobe Systems (ADBE - Free Report) , Costco (COST - Free Report) , FedEx (FDX - Free Report) and Oracle (ORCL - Free Report) .
How Low Can Earnings Estimates Go?
All of us knew that the roughly +25% earnings growth pace in the first three quarters of 2018 was unsustainable, with the pace trending down in a major way starting 2018 Q4 and continuing to decelerate in 2019. All of this has been part of consensus earnings expectations for quite some time and primarily a function of the tax cut arithmetic.
But this deceleration in earnings growth is not the only development on the corporate earnings front as the market’s evolving economic growth expectations, for the U.S. as well as the global economy, has raised legitimate concerns about consensus earnings estimates. This earnings uncertainty compounds the market’s pre-existing worries about Fed policy and global trade. The market’s ongoing weakness, which is contrary to its typical behavior at this time of the year, reflects this confluence of headwinds.
Earnings estimates for 2018 Q4 and full-year 2019 have been coming down lately, but they likely have more to go down given the headwinds.
Q4 estimates have come down for 15 of the 16 Zacks sectors, with the Transportation sector the only one that has experienced positive estimate revisions, which is a reflection of the pullback in fuel expenses. Estimates have come down the most for the Conglomerates, Construction, Consumer Discretionary, Utilities and Basic Materials sectors.
This type of negative revisions is not unusual in historical terms, though they do represent greater estimate cuts than was the trend in the last few quarters. Please note that the negative revisions trend isn’t restricted to Q4 estimates, as expectations for full-year 2019 have started coming down in a meaningful way lately as well.
The S&P 500 index is now in negative territory while the Nasdaq Composite is still holding onto a modest gain for the year. Keep in mind that the pronounced downtrend in the market in early October coincides with the downtrend in earnings estimates.
It hard to envision stocks stabilizing if the market’s collective earnings outlook for 2019 continues to deteriorate. And to get stability in earnings outlook, we need clarity and visibility on the interconnected economic growth and tariff fronts. In other words, there is likely further downside to consensus expectations for full-year 2019.
Q4 Earnings Season Gets Underway
The Q4 earnings season will not take the spotlight at least through the middle of January, but the reporting season officially got underway with the December 4th AutoZone report, followed by the December 13th reports from Adobe Systems and Costco. All three of these companies reported results for their fiscal November-quarter results, which we count as part of the December-quarter tally. We have 14 index members on deck to report results this week, including FedEx, Oracle and others.
Total Q4 earnings are expected to be up +12.3% from the same period last year on +5.7% higher revenues, which would follow the +25.6% earnings growth on +8.4% higher revenues in 2018 Q3.
Earnings growth is expected to be in double digits for 6 of the 16 Zacks sectors, with Energy (+77.4% growth), Finance (+22%), Construction (+26.6%) and Transportation (+23.6%) has the strongest growth. Tech sector earnings are expected to decelerate meaningfully in Q4, up +6.7%, after back-to-back quarters of very strong growth.
Four sectors are expected to have lower earnings in Q4 relative to the year-earlier period, namely Conglomerates (-12.9% decline), Autos (-13.5%), Utilities (-6.3%) and Consumer Staples (-0.4%).
Whether we look at the growth picture on a quarterly basis or on a rolling quarter basis, there is no doubt that growth peak is now behind us. The question now is how much estimates for the coming quarters have still to come down. And the answer to that question will depend on the evolving economic backdrop that we discussed at the start.
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 andEarnings Preview.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.