For Immediate Release
Chicago, IL – April 6, 2020 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes JPMorgan (JPM - Free Report) , Wells Fargo (WFC - Free Report) , FedEx (FDX - Free Report) , Nike (NKE - Free Report) and Costco (COST - Free Report) .
Corporate Earnings & the Coronavirus Pandemic
Mr. Market would like to know the full earnings impact of the ongoing coronavirus pandemic. Knowing that critical piece of information will go some way toward determining a ‘fair value’ for stocks and put an end to the day-to-day roller-coaster ride that daily market action has effectively become.
Calculating the pandemic’s earnings impact is no simple matter. At a minimum, we need to know how long will the pandemic last, without which it is impossible to know when ‘normalcy’ will return to our lives and businesses will reopen.
Unfortunately for us, the coming 2020 Q1 earnings season, which gets underway with the April 14th releases from JPMorgan and Wells Fargo, will not give us the clarity that we need. The reason for that is these companies are as much in the dark about the economic horizon as the rest of us.
The clouds will start lifting once we gain visibility on the pandemic’s duration, which hit Q1 only partially and is expected to ‘peak’ sometime toward the end of this month or next. The hope is that the worst takes place in Q2, with normalcy returning in Q3 and beyond. We have been seeing the effect of this outlook in how estimates have evolved in recent days and weeks, as the charts below
As bad as the Q1 revisions trend above looks, the situation is worse for the current period.
The first three quarters of 2020 are now in negative territory, with the last quarter as the only period with positive growth at this stage.
The chart below puts earnings and revenue growth expectations for full-year 2020 in the context of where growth has been in recent years and what is expected next year.
Full-year 2020 is now in the negative, both for earnings as well as revenues, primarily reflecting the pandemic’s impact. Growth is expected to resume next year and continue the following year.
It is reasonable to be skeptical of these consensus expectations given the all-around uncertainty about the economic impact of this outbreak. That will likely change only once visibility on containment of the pandemic improves, which will enable companies to get a handle on the full extent of their exposure and the pandemic’s macroeconomic impact.
Early 2020 Q1 Scorecard
The aforementioned JPMorgan and Wells Fargo reports would not really be the first Q1 results, as the reporting cycle has ‘officially’ got underway already, with results from 20 S&P 500 members out at this stage. All of these companies have reported results for their fiscal quarters ending in February, which we count as part of our March quarter tally. These early reporters include a number of bellwethers like FedEx, Nike, Costco and others that follow this reporting format.
Total earnings or aggregate net income for these 20 index members that have reported already are down -8.9% from the same period last year on +5.2% higher revenues, with 80% beating EPS estimates and 70% beating revenue estimates.
For Q1 as a whole, combining the roughly three dozen companies that have reported results already with estimates for the wide majority of still-to-come results, total earnings are expected to be down -7.1% on +2.3% higher revenues.
For an in-depth look at the overall earnings picture and expectations for Q1, please check out our weekly Earnings Trends report >>>>How Low Will Earnings Estimates Go?
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