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Zacks Earnings Trends Highlights: Apple, JPMorgan and Micron Technology
Read MoreHide Full Article
For Immediate Release
Chicago, IL – January 24, 2019 – Zacks Director of Research Sheraz Mian says, “Total earnings for the 77 S&P 500 members that have reported Q4 results already are up +14.2% from the same period last year on +8.1% higher revenues, with 70.1% beating EPS estimates and 62.3% beating revenue estimates.”
Earnings Growth Slowing Down
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 77 S&P 500 members that have reported Q4 results already are up +14.2% from the same period last year on +8.1% higher revenues, with 70.1% beating EPS estimates and 62.3% beating revenue estimates.
The results thus far show decent momentum on the revenues side, with revenue growth broadly tracking the elevated pace of the last few quarters and positive revenue surprises starting to move towards recent quarterly trend rates after lagging earlier on.
Performance metrics on the earnings front are notably on the weak side at this stage in the reporting cycle, both in terms of growth as well as the proportion of positive surprises.
Estimates for Q4 had come down significantly ahead of the start of this earnings season. But the relatively low EPS beats % shows that estimates likely were not low enough.
Finance sector results have been decent - neither good nor bad – but they likely turned out to be better than what the market feared.
Looking at Q4 as a whole, combining the actual results that have come out with estimates for the still-to-come companies, total earnings for the S&P 500 index are expected to be up +11% from the same period last year on +5.5% higher revenues.
The strongest year-over-year earnings growth in Q4 is expected to come from the Energy, Transportation, Construction, Finance, and the Retail sectors. Excluding the Finance sector’s strong growth, Q4 earnings growth for the rest of the index comes down to +8.9% (from +11%).
Estimates for Q1 as well as full-year 2019 have been steadily coming down, with 2019 Q1 earnings growth barely in positive territory at present.
For the small-cap S&P 600 index, total earnings for the 45 index members that have reported results already are up +20.2% on +7.7% higher revenues, with 46.7% beating EPS estimates and 57.8% beating revenue estimates.
The small-cap index’s Q4 performance thus far is weaker than we have seen from the same group of companies in other recent periods.
Looking at the small-cap index as a whole, total Q4 earnings are expected to be up +4.5% on +6.5 higher revenues. This would follow +36.5% earnings growth on +7.7% revenue growth in Q3.
For full-year 2019, total earnings for the S&P 500 index are expected to be up +5.8% on +5.9% higher revenues, which would follow the +20.4% earnings growth on +6.3% higher revenues in 2018. Estimates for 2019 have been steadily coming down, with the current +5.8% growth rate down from +9.8% in early October 2018.
The implied ‘EPS’ for the index, calculated using current 2018 P/E of 16.8X and index close, as of January 22th, is $157.05. Using the same methodology, the index ‘EPS’ works out to $166.15 for 2019 (P/E of 15.8X) and $183.78 for 2020 (P/E of 14.3X). 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.
Q4 Earnings Season Scorecard(as of January 23rd, 2019)
Total earnings for the 77 S&P 500 members that have reported Q4 results are up +14.2% on +8.1% higher revenues, with 70.1% beating EPS estimates and 62.3% beating revenue estimates.
We knew that growth would be decelerating in Q4 and we are seeing that in the results thus far. But positive surprises are also tracking below what we had seen from the same group of 77 index members in other recent periods.
Please note that the Q4 beats percentages started out on the low side for both EPS as well as revenues. The revenue beats percentage has since improved, but the proportion of these index members beating EPS estimates is tracking notably below what we have been seeing from the same group of companies in other recent periods. In fact, the Q4 EPS beats % is the lowest since 2016 Q4.
More than positive EPS and revenue surprises for Q4, it is management’s guidance for the current period that will ease the market’s earnings worries. This guidance will also determine how estimates for the current period (2019 Q1) shape up as we go through the Q4 earnings season. Estimates for 2019 Q1 had already been coming down, even before the Q4 earnings season got underway and currently remain barely in positive territory.
Estimates for full-year 2019 have similarly been coming down. The negative revisions trend is widespread across all the major sectors as you can see in the full-year 2019 estimate cuts to Apple (AAPL - Free Report) , JPMorgan (JPM - Free Report) , Micron Technology (MU - Free Report) and many other major companies in different industries.
But even these low growth expectations for the coming quarters are vulnerable to further downward revisions. In other words, it is reasonable for market participants to nurse some doubts about the current earnings backdrop.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?
Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.
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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Zacks Earnings Trends Highlights: Apple, JPMorgan and Micron Technology
For Immediate Release
Chicago, IL – January 24, 2019 – Zacks Director of Research Sheraz Mian says, “Total earnings for the 77 S&P 500 members that have reported Q4 results already are up +14.2% from the same period last year on +8.1% higher revenues, with 70.1% beating EPS estimates and 62.3% beating revenue estimates.”
Earnings Growth Slowing Down
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 77 S&P 500 members that have reported Q4 results already are up +14.2% from the same period last year on +8.1% higher revenues, with 70.1% beating EPS estimates and 62.3% beating revenue estimates.
The results thus far show decent momentum on the revenues side, with revenue growth broadly tracking the elevated pace of the last few quarters and positive revenue surprises starting to move towards recent quarterly trend rates after lagging earlier on.
Performance metrics on the earnings front are notably on the weak side at this stage in the reporting cycle, both in terms of growth as well as the proportion of positive surprises.
Estimates for Q4 had come down significantly ahead of the start of this earnings season. But the relatively low EPS beats % shows that estimates likely were not low enough.
Finance sector results have been decent - neither good nor bad – but they likely turned out to be better than what the market feared.
Looking at Q4 as a whole, combining the actual results that have come out with estimates for the still-to-come companies, total earnings for the S&P 500 index are expected to be up +11% from the same period last year on +5.5% higher revenues.
The strongest year-over-year earnings growth in Q4 is expected to come from the Energy, Transportation, Construction, Finance, and the Retail sectors. Excluding the Finance sector’s strong growth, Q4 earnings growth for the rest of the index comes down to +8.9% (from +11%).
Estimates for Q1 as well as full-year 2019 have been steadily coming down, with 2019 Q1 earnings growth barely in positive territory at present.
For the small-cap S&P 600 index, total earnings for the 45 index members that have reported results already are up +20.2% on +7.7% higher revenues, with 46.7% beating EPS estimates and 57.8% beating revenue estimates.
The small-cap index’s Q4 performance thus far is weaker than we have seen from the same group of companies in other recent periods.
Looking at the small-cap index as a whole, total Q4 earnings are expected to be up +4.5% on +6.5 higher revenues. This would follow +36.5% earnings growth on +7.7% revenue growth in Q3.
For full-year 2019, total earnings for the S&P 500 index are expected to be up +5.8% on +5.9% higher revenues, which would follow the +20.4% earnings growth on +6.3% higher revenues in 2018. Estimates for 2019 have been steadily coming down, with the current +5.8% growth rate down from +9.8% in early October 2018.
The implied ‘EPS’ for the index, calculated using current 2018 P/E of 16.8X and index close, as of January 22th, is $157.05. Using the same methodology, the index ‘EPS’ works out to $166.15 for 2019 (P/E of 15.8X) and $183.78 for 2020 (P/E of 14.3X). 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.
Q4 Earnings Season Scorecard(as of January 23rd, 2019)
Total earnings for the 77 S&P 500 members that have reported Q4 results are up +14.2% on +8.1% higher revenues, with 70.1% beating EPS estimates and 62.3% beating revenue estimates.
We knew that growth would be decelerating in Q4 and we are seeing that in the results thus far. But positive surprises are also tracking below what we had seen from the same group of 77 index members in other recent periods.
Please note that the Q4 beats percentages started out on the low side for both EPS as well as revenues. The revenue beats percentage has since improved, but the proportion of these index members beating EPS estimates is tracking notably below what we have been seeing from the same group of companies in other recent periods. In fact, the Q4 EPS beats % is the lowest since 2016 Q4.
More than positive EPS and revenue surprises for Q4, it is management’s guidance for the current period that will ease the market’s earnings worries. This guidance will also determine how estimates for the current period (2019 Q1) shape up as we go through the Q4 earnings season. Estimates for 2019 Q1 had already been coming down, even before the Q4 earnings season got underway and currently remain barely in positive territory.
Estimates for full-year 2019 have similarly been coming down. The negative revisions trend is widespread across all the major sectors as you can see in the full-year 2019 estimate cuts to Apple (AAPL - Free Report) , JPMorgan (JPM - Free Report) , Micron Technology (MU - Free Report) and many other major companies in different industries.
But even these low growth expectations for the coming quarters are vulnerable to further downward revisions. In other words, it is reasonable for market participants to nurse some doubts about the current earnings backdrop.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?
Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.
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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.