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Wal-Mart, Cisco Systems, Nvidia, Ford and Hasbro are part of Zacks Earnings Preview
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For Immediate Release
Chicago, IL – November 11,2019 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Wal-Mart (WMT - Free Report) , Cisco Systems (CSCO - Free Report) , Nvidia (NVDA - Free Report) , Ford (F - Free Report) and Hasbro (HAS - Free Report) .
Were Q3 Earnings Estimates Too Low?
The popular narrative about the Q3 earnings season is that the actual results look better only relative to the very low levels to which estimates had fallen. In other words, consensus EPS and revenue estimates were too easy to beat.
But had that been the case, the beats percentages should have been a lot higher than what we actually saw. With results from 447 S&P 500 members or 89.4% of the index’s total membership already out, we have the numbers to speak for themselves.
For the 447 S&P 500 members that have reported results through Friday, November 8th, 72.5% are beating EPS estimates and 57.9% are beating revenue estimates.
Over the last 12 quarters, the low EPS beats percentage for these 447 index members was 66.9% (2018 Q4) and the high was 79.9% (2018 Q2), with an average EPS beats percentage of 75%. The EPS beats percentage in Q3 started out very high, but currently remains towards the high end of this 12-quarter range.
On the revenues side, the beats percentage for this group of 347 index members has been as low as 48.3% (2015 Q3) and as high as 75.4% (2018 Q1) over the preceding 12-quarter period. As is the case with the EPS beats percentage, the Q3 revenue beats percentage remains within this historical range, though admittedly towards the lower end of that range.
What this means is that Q3 estimates were likely just about right; neither too low, nor too high.
With only 53 S&P 500 members still to report Q3 results, these conclusions about Q3 estimates will likely carry through to the end of this reporting season.
We have almost 450 companies on the docket reporting results this week, including 15 S&P 500 members. This week’s docket includes Wal-Mart, Cisco Systems, Nvidia and others.
So, what explains the market’s favorable reaction to Q3 results?
Many in the market appeared to fear a notable uptick in negative guidance for Q4 and beyond, in the wake of renewed signs of deceleration in the global and U.S. economy. Weak guidance from a number of companies like Ford, Hasbro and others reflect this reality.
But a preponderance of negative guidance from across all major sectors has failed to materialize. In other words, there is no material deterioration in the earnings picture relative to what was expected earlier; Q3 results and guidance for the current and coming quarters has been better than ‘feared.’
That said, estimates for the current and coming quarters has been coming down since the Q3 earnings season got underway.
Even more significant on the revisions front is how estimates for full-year 2020 are shaping up. There has been no growth in 2019, but the market has been banking on growth resuming next year.
The above negative revisions trend for full-year 2020 is still within historical ranges, but a significant acceleration in estimate cuts will likely be a major negative for market expectations.
S&P 500 Scorecard (as of Friday, November 1st, 2019)
We now have Q3 results from 447 S&P 500 members or 89.4% of the index’s total membership. Total earnings (or aggregate net income) for these 447 companies are down -1.5% from the same period last year on +4.2% higher revenues, with 72.5% beating EPS estimates and 57.9% beating revenue estimates.
Looking at Q3 as a whole, combining the actual results from the 447 index members with estimates for the still-to-come companies, total earnings (or aggregate net income) is expected to be down -1.9% from the same period last year on +4.2% higher revenues.
Tough comparisons to last year when growth was boosted by the tax cut legislation were all along expected to weigh on earnings growth in 2019. Moderating U.S. economic growth and notable slowdowns in other major global economic regions are having a further negative impact. Uncertainty about the global trade regime and growing resort to tariffs are not helping matters either.
My sense is that the final Q3 earnings growth rate will be the vicinity of what we saw in the first half of the year.
For an in-depth look at the overall earnings picture and expectations for Q3 and beyond, please check out our weekly Earnings Trends report >>> The Evolving Earnings Picture
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.
This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
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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Wal-Mart, Cisco Systems, Nvidia, Ford and Hasbro are part of Zacks Earnings Preview
For Immediate Release
Chicago, IL – November 11,2019 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Wal-Mart (WMT - Free Report) , Cisco Systems (CSCO - Free Report) , Nvidia (NVDA - Free Report) , Ford (F - Free Report) and Hasbro (HAS - Free Report) .
Were Q3 Earnings Estimates Too Low?
The popular narrative about the Q3 earnings season is that the actual results look better only relative to the very low levels to which estimates had fallen. In other words, consensus EPS and revenue estimates were too easy to beat.
But had that been the case, the beats percentages should have been a lot higher than what we actually saw. With results from 447 S&P 500 members or 89.4% of the index’s total membership already out, we have the numbers to speak for themselves.
For the 447 S&P 500 members that have reported results through Friday, November 8th, 72.5% are beating EPS estimates and 57.9% are beating revenue estimates.
Over the last 12 quarters, the low EPS beats percentage for these 447 index members was 66.9% (2018 Q4) and the high was 79.9% (2018 Q2), with an average EPS beats percentage of 75%. The EPS beats percentage in Q3 started out very high, but currently remains towards the high end of this 12-quarter range.
On the revenues side, the beats percentage for this group of 347 index members has been as low as 48.3% (2015 Q3) and as high as 75.4% (2018 Q1) over the preceding 12-quarter period. As is the case with the EPS beats percentage, the Q3 revenue beats percentage remains within this historical range, though admittedly towards the lower end of that range.
What this means is that Q3 estimates were likely just about right; neither too low, nor too high.
With only 53 S&P 500 members still to report Q3 results, these conclusions about Q3 estimates will likely carry through to the end of this reporting season.
We have almost 450 companies on the docket reporting results this week, including 15 S&P 500 members. This week’s docket includes Wal-Mart, Cisco Systems, Nvidia and others.
So, what explains the market’s favorable reaction to Q3 results?
Many in the market appeared to fear a notable uptick in negative guidance for Q4 and beyond, in the wake of renewed signs of deceleration in the global and U.S. economy. Weak guidance from a number of companies like Ford, Hasbro and others reflect this reality.
But a preponderance of negative guidance from across all major sectors has failed to materialize. In other words, there is no material deterioration in the earnings picture relative to what was expected earlier; Q3 results and guidance for the current and coming quarters has been better than ‘feared.’
That said, estimates for the current and coming quarters has been coming down since the Q3 earnings season got underway.
Even more significant on the revisions front is how estimates for full-year 2020 are shaping up. There has been no growth in 2019, but the market has been banking on growth resuming next year.
The above negative revisions trend for full-year 2020 is still within historical ranges, but a significant acceleration in estimate cuts will likely be a major negative for market expectations.
S&P 500 Scorecard (as of Friday, November 1st, 2019)
We now have Q3 results from 447 S&P 500 members or 89.4% of the index’s total membership. Total earnings (or aggregate net income) for these 447 companies are down -1.5% from the same period last year on +4.2% higher revenues, with 72.5% beating EPS estimates and 57.9% beating revenue estimates.
Looking at Q3 as a whole, combining the actual results from the 447 index members with estimates for the still-to-come companies, total earnings (or aggregate net income) is expected to be down -1.9% from the same period last year on +4.2% higher revenues.
Tough comparisons to last year when growth was boosted by the tax cut legislation were all along expected to weigh on earnings growth in 2019. Moderating U.S. economic growth and notable slowdowns in other major global economic regions are having a further negative impact. Uncertainty about the global trade regime and growing resort to tariffs are not helping matters either.
My sense is that the final Q3 earnings growth rate will be the vicinity of what we saw in the first half of the year.
For an in-depth look at the overall earnings picture and expectations for Q3 and beyond, please check out our weekly Earnings Trends report >>> The Evolving Earnings Picture
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.
This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
See their latest picks free >>
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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.
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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.