JPMorgan, Goldman Sachs, Morgan Stanley, McDonalds and Halliburton are part of Zacks Earnings Preview:
Zacks Equity Research
Updated
For Immediate Release
Chicago, IL – January 23, 2017 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes JPMorgan (NYSE: JPM - Free Report ), Goldman Sachs (NYSE: GS - Free Report ), Morgan Stanley (NYSE: MS - Free Report ), McDonalds (NYSE: MCD - Free Report ) and Halliburton (NYSE: HAL - Free Report ).
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Q4 Earnings Growth Highest in 8 Quarters
The Q4 earnings season has gotten off to a good start, with earnings and revenue growth tracking above other recent periods and on track to reach the highest level in 8 quarters. Positive surprises, particularly on the earnings front, are a bit on the low side relative to 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 300 companies coming out with quarterly results, including 105 S&P 500 members.
As of Friday, January 20th, we have seen Q4 results from 63 S&P 500 members that combined account for 19.2% of the index’s total market capitalization. Total earnings for these 63 index members are up +4.7% on +2.7% higher revenues, with 66.7% beating EPS estimates and 50.8% coming ahead of top-line expectations.
The Q4 growth pace is notably tracking above what we had seen from the same group of 63 index members in other recent periods. But positive surprises (right-hand chart above) are tracking a bit on the low side at this stage, particularly on the earnings side. The 66.7% proportion of Q4 companies beating EPS estimates compares to 81% in the preceding quarter, 75% as the 4-quarter average and 71.3% 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.
Trump Bump for Banks
The sample of Q4 earnings reports is heavily weighted towards the Finance sector at this stage whose improved results are helping the aggregate growth picture as well. The growth picture looks a lot less impressive once looked at on an ex-Finance basis.
Total earnings for the roughly half of the Finance sector’s market cap in the S&P 500 index that have reported results are up +11.8% from the same period last year on +2.6% higher revenues, with +68.2% beating EPS estimates and +45.5% beating top-line estimates. This is better growth performance than we have seen from the sector in other recent periods.
We didn’t really see the full impact of higher interest rates on the banks’ net interest margins in Q4 results. But higher interest rates, increased confidence and the resultant enhanced appetite for risks did juice the trading revenues for JPMorgan (NYSE: JPM - Free Report ), Goldman Sachs (NYSE: GS - Free Report ) and even Morgan Stanley (NYSE: MS - Free Report ). This didn’t come as a surprise to the market, as estimates and stock prices had already run up quite a bit ahead of these earnings reports. It is reasonable to expect these bank stocks to remain in a holding pattern in the coming days till fundamentals changes in a meaningful way and/or progress on legislative expectations start showing up.
Key Reports for Monday
McDonalds (NYSE: MCD - Free Report ) and Halliburton (NYSE: HAL - Free Report ) are the notable for the four index members reporting results today. Estimates for Zacks Rank #1 (Strong Buy) rated Halliburton have been going up lately, reflecting the company’s strong positioning in the North American oilfield region. The stock has literally been on a tear lately, up +88.9% in the past year vs. +44.2% gain for the Zacks Energy sector.
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