CBS, Disney, Google, Microsoft and Apple are part of Zacks Earnings Preview:


For Immediate Release
Chicago, IL – November 4, 2013 – releases the list of companies likely to issue earnings surprises. This week’s list includes CBS Corp (CBS-Free Report), Disney (DIS-Free Report), Google (GOOG-Free Report), Microsoft (MSFT-Free Report) and Apple (AAPL-Free Report).
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Q4 Earnings Estimates Are Coming Down

The bulk of the Q3 earnings season is now behind us, with results from 367 S&P 500 members, or 73.4% of the index’s total membership, already known. We have a busy reporting docket this week as well, the last busy week of the Q3 earnings season, with more than 635 companies releasing results, including 72 S&P 500 members. This week’s reporting line-up has heavy representation from the oil & gas and utility industries, though a number of major media companies like CBS Corp (CBS-Free Report) and Disney (DIS-Free Report) are also reporting results.

Our overall verdict on the Q3 earnings season is favorable, particularly relative to the last few quarters. That actual results have been better relative to lowered pre-season expectations is no surprise given management team’s impressive track record in under-promising and over-delivering. There is still not much growth and most companies are still guiding lower, prompting estimates for Q4 to come down. But whatever little growth we have in Q3 thus far is better than we have seen in recent quarters. And for those keeping records, the Q3 earnings season appears on track a new quarterly record for total earnings, surpassing the level achieved in Q2.

Total earnings for the 367 S&P 500 companies that have reported results are up +4.3% with 67% beating earnings expectations, while total revenues for these companies are up +2.8% and 52.6% are beating top-line expectations.

This is better performance than what this same group of 367 companies reported in Q2, and the 4-quarter average. As you can see in the chart below, the earnings and revenue growth rates for these companies is a notable improvement on what we saw from this same group of companies in Q2 and the 4-quarter average.
Unlike recent quarters, The Finance sector isn’t driving growth in Q3. Total earnings growth outside of Finance of +2.8% compares to earnings decline of -4.3% in Q2 and the average -1.5% decline in the preceding four quarters. Improved growth at the Technology, Basic Materials, and Transportation sectors accounts for the positive ex-Finance variance in Q3 relative to the recent past.

Total earnings for the 81.4% of the Technology sector’s market capitalization, that have reported results already, are up +5.1% from the same period last year, which compares to earnings declines of -11.6% in Q2 and the 4-quarter average of -3.4%.

At the medium industry level (or M level), we have 7 industries in the Technology sector, of which only Telecom Services hasn’t reported any results as of yet. The growth picture has improved for each of the other six industries, with the improvement particularly notable for the Software & Services and Semiconductor industries. These two industries combined, account for 41% of the sector’s total earnings.

Strong earnings growth at Google (GOOG-Free Report) and Microsoft (MSFT-Free Report) accounts for the positive growth profile of the Software & Services industry and account for a big part of the Tech sector’s positive growth picture. Excluding both these companies form the Tech sector’s tally, the sector’s Q3 total earnings growth drops from +5.1% to +1.6%.   

Total earnings for the Computer & Office Equipment industry, the biggest industry in the sector accounting for almost 44% of the sector’s total earnings, are down -4.3% from the same period last year, primarily driven by tough comparisons for Apple (AAPL-Free Report). But this still better performance than what the industry was able to achieve in recent quarters. Apple’s negative year-over-year comparison has been a big drag on the sector’s growth picture. Excluding Apple, total earnings for the Tech sector would be up +9.6% (up +5.1% including the company).
About the Zacks Rank

Since 1988, the Zacks Rank has proven that "Earnings estimate revisions are the most powerful force impacting stock prices." Since inception in 1988, #1 Rank stocks have generated an average annual return of +28%. During the 2000-2002 bear market, Zacks #1 Rank stocks gained +43.8%, while the S&P 500 tumbled -37.6%. Also note that the Zacks Rank system has just as many Strong Sell recommendations (Rank #5) as Strong Buy recommendations (Rank #1). Since 1988, Zacks Rank #5 stocks have significantly underperformed the S&P 500 (+3% versus +10%). Thus, the Zacks Rank system allows investors to truly manage portfolio trading effectively.
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