As the Q4 earnings season picks up pace, we believe this quarter is witnessing the highest growth momentum in the last eight quarters. As of Jan 27, 2017, 170 S&P 500 members, accounting for 33.9% of the index’s total market capitalization, have reported results, according to the Earnings Preview report.
Total earnings for these 170 index members were up 6.0% from the year-ago quarter on a 3.1% improvement in revenues. The beat ratio was 64.1% for earnings and 54.7% for revenues. We remind investors that Q3 was the first quarter to see positive earnings growth (+3.8%) after five consecutive quarters of an earnings decline for the S&P 500 index.
However, for these 170 index members, Q4 has seen fewer positive earnings surprises than the previous quarter.
Nonetheless, the positive earnings growth momentum is expected to continue through the season. As per our Earnings Preview report, total earnings for the S&P 500 companies will grow 5.2% year over year on 4.0% higher revenues. Please note that estimates for the current period (1Q17) are also looking up.
However, the picture hasn’t been as bright for the pharmaceutical companies so far this season. Among the handful pharma companies that reported results last week, Biogen Inc BIIB and Johnson & Johnson JNJ reported mixed results, wherein their earnings beat estimates but revenues missed the same. Both the companies saw a slowdown in some of their key drugs’ sales.
Bristol-Myers’ BMY fourth-quarter results were disappointing as well, with earnings lagging expectations and the company lowering its adjusted earnings outlook. Meanwhile, Celgene Corporation CELG missed expectations for both earnings and sales.
Here we have two pharma giants that are set to report fourth-quarter results on Jan 31. Let's see how things are shaping up for this quarter.
Pfizer Inc. PFE
Pfizer, which is scheduled to release earnings before the market opens, had delivered a negative surprise of 1.61% last quarter. However, the pharma giant has a decent track record. The company’s earnings surpassed expectations in three of the last four quarters, with an average positive surprise of 6.34%.
Pfizer, Inc. Price and EPS Surprise
Pfizer, Inc. Price and EPS Surprise | Pfizer, Inc. Quote
For this quarter, Pfizer has an Earnings ESP of 0.00% and a Zacks Rank #3 (Hold). The Zacks Consensus Estimate is pegged at 50 cents.
While both new products like Xalkori, Xeljanz and Ibrance and old products like Lyrica will likely contribute meaningfully to the top line, earnings are anticipated to be driven by cost savings and share buybacks. (Read More: What Lies in Store for Pfizer this Earnings Season?).