Discover Financial, FedEx, Oracle, Alcoa and Goldman Sachs are part of Zacks Earnings Preview:

Zacks

For Immediate Release

Chicago, IL – June 19, 2013 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Discover Financial (DFS-Free Report), FedEx (FDX-Free Report), Oracle (ORCL-Free Report), Alcoa (AA-Free Report) and Goldman Sachs (GS-Free Report).

To see more earnings analysis, visit http://at.zacks.com/?id=3207.

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Looking Ahead to Q2 Earnings Season (revised)

We are issuing this revised version of Earnings Preview to address a mistake: earlier, we had mentioned that from Discover Financial (DFS-Free Report) was to have reported earnings yesterday after the bell; the company has not reported and will not report earnings this week.

Q2 earnings season will actually get underway this week with the earning release from such bellwethers as FedEx (FDX-Free Report) on Wednesday and Oracle (ORCL-Free Report)on Thursday.

Alcoa (AA-Free Report) typically gets credited for kicking off each earnings season, but we don’t count Alcoa’s report as the ‘official’ start. In fairness to Alcoa, investors start taking notice of the earnings season only with their release, which for Q2 will happen on July 8th.

As has been the case at the start of recent quarterly earnings cycles, expectations for Q2 earnings season remain quite low. Total earnings for companies in the S&P 500 are expected to be up only +0.6% from the same period last year. This is down from +3.9% growth expected in the quarter in early April. Total earnings were up +2.3% in Q1, but the expectation ahead of the start of the Q1 earnings season was for earnings growth to be in the negative territory.

Finance wasn’t a big driver of aggregate earnings growth for the S&P 500 in Q1, but takes back the lead role in Q2, with total earnings for the sector expected to be up +19.4% and estimates steadily going up. Earnings for the sector were up +7.7% in Q1, which came after many quarters of double-digit growth.

All industries within the Finance sector like the major banks, regional banks, brokers and insurers are expected to have positive growth. But the growth picture is particularly notable for the brokerage and investment management industry such as Goldman Sachs (GS-Free Report), with total earnings for the group expected to be up +39.6% in Q2 after the +2.6% gain in Q1.

Unlike Finance, the earnings picture for the Technology sector, the largest sector in the S&P 500, remains fairly weak. Total earnings for the sector are expected to be down -8.7% from the same period last year, which follows the -3.8% earnings decline in Q1.

Earnings estimates for the sector have been steadily coming down over recent weeks, with the current -8.7% decline down from expected decline of -3.1% in mid-April. The weakest group within the Technology sector is the PC makers, with total earnings for the Computers and Office Equipment industry expected to be down -16.1% in Q2 after the -14.1% decline in Q1. Semiconductors and electronics are other Tech industries with negative earnings growth in the quarter.  

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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