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Zacks Earnings Trends Highlights: Amazon and McDonalds

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For Immediate Release

Chicago, IL – May 30, 2019 – Zacks Director of Research Sheraz Mian says, "Total earnings for the 483 S&P 500 members or 96.6% of the index’s total membership that have reported results are up +0.2% on +4.7% higher revenues."

Q1 Retail Sector Scorecard

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:

  • The Retail sector’s Q1 earnings results have been mixed relative to other recent periods. Total earnings and revenues for the sector are up +13.2% and +8.1% respectively, with 75.8% beating EPS estimates and 51.5% beating revenue estimates. 
  • Total earnings for the 483 S&P 500 members or 96.6% of the index’s total membership that have reported results are up +0.2% on +4.7% higher revenues, with 76.8% beating EPS estimates and 59.0% beating revenue estimates.
  • Q1 earnings and revenue growth is unsurprisingly tracking notably below what we had seen from the same group of 483 index members in the recent past, but companies are beating EPS estimates roughly at the same proportion as in other recent periods but revenue beats were a lot less common.
  • Total earnings for the Tech sector (95.5% of Tech companies in the S&P 500 have reported) are down -6.9% from the same period last year on +2.6% higher revenues, with 81.3% beating EPS estimates and 67.2% beating revenue estimates. This is a weaker showing than has been the trend in other recent periods.  
  • Total earnings for the Finance sector (all results are in) are up +2.7% on 8.2% higher revenues, with 78.4% beating EPS estimates and 61.9% beating revenue estimates.  
  • For the small-cap S&P 600 index, we now have Q1 results from 559 index members or 93.2% of the index’s total membership. Total earnings for these 559 companies are down -17.7% from the same period last year on +3.1% higher revenues, with 54.9% beating EPS estimates and 56.4% beating revenue estimates. 
  • Looking at Q1 as a whole for the small-cap index, total Q1 earnings are expected to be down -19.2% from the same period last year on +4.5% higher revenues.
  • For full-year 2019, total earnings for the S&P 500 index are expected to be up +2.1% on +2.6% higher revenues, which would follow the +23.3% earnings growth on +9.3% higher revenues in 2018. Double-digit growth is expected to resume in 2020, with earnings expected to be up +10.8% that year.
  • For 2019 Q2, total earnings for the S&P 500 index are expected to be down -1.8% on +4.4% higher revenues. Estimates for Q2 as well as full-year 2019 have come down, with the current +2.1% growth rate for full-year 2019 down from +9.8% in early October 2018.
  • The magnitude and pace of negative revisions to Q2 estimates compares favorably to what we had witnessed ahead of the start of the Q1 earnings season. 
  • The implied ‘EPS’ for the index, calculated using current 2019 P/E of 17.1X and index close, as of May 28th, is $163.97. Using the same methodology, the index ‘EPS’ works out to $181.66 for 2020 (P/E of 15.4X). The multiples for 2019 and 2020 have been calculated using the index’s total market cap and aggregate bottom-up earnings for each year.

Retail Sector Scorecard

We now have Q1 results from 33 of the 39 retailers in the S&P 500 companies. Total earnings for these 33 retailers are up +13.2% from the same period last year on +8.1% higher revenues, with 75.8% beating EPS estimates and 51.5% beating revenue estimates. The comparison charts below put these results in a historical context.

The comparisons charts above provide a mixed picture, with EPS beats tracking above or about in-line with historical periods while revenue beats are tracking below what we had seen from the same group of retailers in the past. Given how low expectations had been ahead of the start of this earnings season, this is a fairly weak showing from the traditional operators.

With respect to growth, earnings growth is tracking below what we had seen from the same group of 33 retailers in the past, but revenue growth is tracking either better or in-line with historical periods. 

Please note that the Zacks Retail sector also includes the online vendors like Amazon (AMZN - Free Report) and restaurant operators like McDonalds (MCD - Free Report) , in addition to the traditional brick-and-mortar operators. A big part of the reported results from the 28 retailers are comprised of such online vendors or restaurant operators.

Amazon’s +118.6% higher earnings on +17% higher revenues in Q1 is likely having an outsized bearing the sector’s growth picture.

Looking at Q1 expectations as a whole for the sector by combining the actual results that have come out with estimates for the still-to-come companies, total Retail sector earnings are expected to be up +11.6% on +7.2% higher revenues. Excluding Amazon, the sector’s Q1 earnings would be up a mere +2.9% from the same period last year on +6% higher revenues.

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