For Immediate Release
Chicago, IL – January 30, 2017 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Apple (NASDAQ: AAPL – Free Report ), Facebook (NASDAQ: FB – Free Report ), Exxon (NYSE: XOM – Free Report ) and Amazon (NASDAQ: AMZN – Free Report ).
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Earnings Growth Returns. Will It Continue?
Corporate earnings have started growing again, with growth in the ongoing Q4 earnings season on track to reach its highest level in 8 quarters. Growth is still modest – the Q4 earnings growth is currently on track to reach +5.2% and the final growth tally for the quarter will at best be a couple of percentage points higher. But this is still a notable improvement over what we were experiencing in the recent past.
Please recall that earnings growth turned positive only in 2016 Q3, having declined in each of the preceding 5 quarters.
Positive surprises, particularly on the earnings front, are tracking below other historical periods at this stage. We will see if this trend continues this week as we enter the heart of the earnings season, with more 400 companies coming out with quarterly results, including 106 S&P 500 members.
Q4 Scorecard (as of January 27, 2017)
We have crossed the one-third mark in the Q4 reporting cycle, with results from 170 S&P 500 members, or 33.9% of the index’s total membership, already out. Total earnings for these 170 index members are up +6.0% on +3.1% higher revenues, with 64.1% beating EPS estimates and 54.7% coming ahead of top-line expectations.
The Q4 growth pace is notably tracking above what we had seen from the same group of 170 index members in other recent periods. But positive surprises are tracking on the low side at this stage, particularly on the earnings front. The 64.1% proportion of Q4 companies beating EPS estimates compares to 81.2% in the preceding quarter, 76.3% as the 4-quarter average and 72.2% as the 12-quarter average. Positive revenue surprises are tracking below what we had seen from the same group of companies in Q3, but are roughly in-line with historical periods.
Standout Sectors
Sectors with strong growth and better than expected results include the Finance, Technology, Construction, Industrial Products, Basic Materials and Consumer Discretionary sectors. Positive surprises for all of these sectors are tracking above the index level.
Finance : With results from 57.7% of the sector’s market cap in the S&P 500 index already out, total earnings for the sector are up +11.3% from the same period last year on +3.1% higher revenues, with +66.7% beating EPS estimates and +46.2% beating top-line estimates.
This is a better growth performance than we have seen from the sector in other recent periods. Please note that positive surprises are as hard to come by in the Finance sector as they are elsewhere.
Strong Finance sector growth is a big driver of the aggregate growth performance for the S&P 500 index as a whole. Excluding the Finance sector, the Q4 growth pace still compares favorably with other recent periods, but a lot less so.
Technology : For the Technology sector, we now have Q4 results from 59.6% of the sector’s total market cap. Total earnings for these companies are up +7.2% from the same period last year on +4.9% higher revenues, with 69% beating EPS estimates and 82.8% beating revenue estimates.
We will see what this week’s Apple (NASDAQ: AAPL – Free Report ) and Facebook (NASDAQ: FB – Free Report ) reports bring, but the sector’s Q4 earnings and revenue growth is about in-line with what we saw from this same group of Tech companies in the preceding quarter (2016 Q3), though it is notably tracking above the 4-quarter and 12-quarter averages. With respect to positive surprises, Tech companies appear to be beating EPS estimates at a lower proportion than has historically been the case, though the proportion of positive earnings surprises remains above the index level. Revenue surprises, on the other hand, are tracking notably above historical periods.
Key Reports for the Week of January 30th
Tuesday – 1/31/2017 : Monday has a relatively light reporting docket, but Tuesday is very busy with more than 90 companies reporting results, including 33 S&P 500 members (of which 22 are in the morning). The focus will be on Apple, which reports after the market’s close. Exxon (NYSE: XOM – Free Report ) will be a key report in the morning.
Apple is expected to report $3.22 in earnings on $76.2 billion in revenues, which compare to $3.28 on $75.9 billion in revenues in the year-earlier period. The stock is up +9.7% since November 8th vs. +7% for the S&P 500 index and +6.1% for the Zacks Technology sector. December quarter estimates have been stable in recent days, though they have come down for the March quarter.
Wednesday – 2/01/2017 : Facebook is the most high profile of the 27 index members reporting results today (it will report after the market’s close). The focus will be on the social media giant’s ad revenues and daily active users, but the current Zacks Consensus EPS estimate is $1.13 on $8.4 billion in revenues. This compares to EPS of $0.59 on $5.8 billion in revenues in the year-earlier period. Estimates have modestly inched up in recent days. The stock has performed in-line with the Zacks Tech sector since November 8th, up +6.3% vs. +6.1%.
Thursday – 2/02/2017 : On a busy reporting day with 35 index members coming out with Q4 results (23 in the morning & 12 after the market’s close), the most notable report is from Amazon (NASDAQ: AMZN – Free Report ) in the evening.
Amazon is expected to report $1.41 in earnings (up +41.5% year over year) on $44.8 billion in revenues (up +25.4% in revenues). Estimates have come down ahead of the earnings report, but Amazon has never really been an EPS story; it is all top-line growth, particularly gains in its cloud business, Amazon Web Services. Amazon has staked a well-regarded claim to leadership in the fast-growing cloud business. The stock has been a strong performer over the past year, up +31.4% vs. +12.4% gain for the Zacks Retail sector.
Note : Sheraz Mian regularly provides earnings analysis on Zacks.com and appears frequently in the print and electronic media. In addition to this Earnings Preview article, he publishes the Zacks Earnings Trends report every week.
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