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(0:15) - Earnings Just Keep Getting Better
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(3:45) - S&P 500: Earnings vs. Revenue
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(7:50) - Tax Reform Impact on Earnings Reports
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(12:15) - Outlook for 2018 Q1 Earnings
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(16:00) - S&P 600 Earnings
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(22:30) - What Could Go Wrong?
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(26:00) - Episode Roundup: Podcast@Zacks.com
Welcome to Episode #117 of the Zacks Market Edge Podcast.
Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.
In this episode, Tracey is joined by Sheraz Mian, Zacks Director of Research, to discuss the fourth quarter 2017 earnings season and what 2018 is expected to look like.
The third quarter earnings season was a solid one so expectations were already running high heading into the fourth quarter earnings season. But no one had any idea it would be THIS hot.
Earnings and Revenue Growth Jumping
How hot is it?
With 31% of the S&P 500 reporting so far:
1. Earnings up 12.7%
2. Revenue up 8.3%
3. 81.5% beating EPS estimates
4. 78.3% beating revenue estimates
To put it into perspective, the four-quarter average for earnings growth is 8.9%. The four-quarter average for revenue growth is just 4.4%.
On earnings beats, the four-quarter average is 74% and the four-quarter average for revenue beats is just 62.6%.
Revenue Gains Are Impressive
Many argue that earnings beats aren’t that hard to do as management can manipulate the numbers by lowering guidance etc.
But revenue growth and beats are a much harder metric to mess around with. You either have the revenue growth or you don’t.
Technology is now about 25% of the S&P 500 and its revenue growth is already up 9.4% in the fourth quarter with more companies yet to report. The sector did 8.8% in the third quarter as it builds momentum.
Will the S&P 600 Follow?
Only 16% of the S&P 600 small caps have reported earnings but bullish trends are developing there as well.
Revenue growth has soared, rising 10.9%, compared to a four-quarter average of a decline of 0.6%.
Earnings are expected to rise 11.8% for the fourth quarter of 2017 and another 22.3% in the first quarter of 2018.
Finance, not tech, dominates the S&P 600. It’s about 21% of the total market cap. But finance is expected to see 44% earnings growth.
How Can You Invest in This Hot Earnings Season?
There’s always the option to buy the underlying indexes.
For the S&P 500:
1. The SPDR S&P 500 ETF (SPY)