The Fed’s Taper decision may have been delayed a bit, but the 2013 Q3 earnings season has gotten underway, with 7 S&P 500 companies already reporting results. It’s hard to draw any conclusions from this small sample size, but a number of the reports have been industry leaders like FedEx (FDX), Oracle (ORCL) and ConAgra (CAG).
The FedEx results were strong. But the company’s global economic bellwether status notwithstanding, the outperformance was more a function of company-specific initiatives and less due to momentum in the global economy.
We are still about three weeks away from the Q3 reporting cycle really ramping up, but we will continue to get a steady supply of earnings before then. This week brings earnings reports from 27 companies, including 10 S&P 500 members. Nike (NKE), Accenture (ACN), KB Homes (KBH) and Lennar (LEN) are some of the notable companies reporting results this week.
As has been the case at the start of recent quarterly earnings cycles, expectations for the Q3 earnings season have fallen sharply over the last three months. Total earnings for companies in the S&P 500 are now expected to be up only +1.2% from the same period last year, down from +1.3% last week and +5.1% at the start of the quarter in early July, as the chart below shows.
This negative revisions behavior is hardly unusual as we have been repeatedly seeing this pattern play out in recent quarters. Companies have been overwhelmingly guiding lower, prompting analysts to cut estimates for the following quarter. The revisions behavior ahead of the Q2 earnings season was no different and most of the same sectors have experienced negative revisions this time around as well.
The ‘regulars’ on the negative estimate revisions beat include Technology, Basic Materials and Industrials. But Retail and Consumer Discretionary have played material roles in bringing down expectations for Q3.
The chart below compares the Q3 total earnings growth expected for these five sectors at the start of the quarter and where those expectations stand at present.
Estimates for other sectors have come down as well, with even the Finance sector earnings expected to be up +6.4% now vs. the +8.1% that was expected in early July. Energy, Utilities, Conglomerates and even Construction have suffered negative revisions in varying degrees.
While estimates for Q3 have come down, the same for Q4 and the following quarters have held up fairly well, as the chart below shows.
Part of the extremely strong growth expected in Q4 is a function of easier comparisons, as 2012 Q4 represents the lowest quarterly earnings total for the S&P 500 in the last six quarters, with the comps particularly easy for the Finance sector. But it’s not all due to easy comparisons, as the expected earnings totals for Q4 represent a new all-time quarterly record.
Total earnings for the S&P 500 reached a new record at $256.7 billion in Q2, surpassing Q1’s $253.8 billion record. But they are expected to reach $273.8 billion in 2013 Q4, with total earnings growth outside of Finance expected at +8.6%.
Judging by what has happened over the past year or so, these Q4 estimates will come down as companies shares their outlooks on the Q3 earnings calls. The market didn’t care much as estimates came down in the last few quarters, hoping for better times ahead. Will it do the same this time as well, pushing its hopes of earnings ramp up into 2014? We will find out the answer to that question over the next two months.
Monday - 9/23
- Nothing major on the economic or earnings fronts today.
Tuesday - 9/24
- We will get the July Case-Shiller home price index and the Conference Board’s September Consumer Confidence index. Consumer Confidence is expected to modestly pullback from the prior 81.5 reading.
- Carnival (CCL), Carmax (KMX), KB Homes (KBH) and Lennar (LEN) are the key earnings reports today, all in the morning.
- Zacks Earnings ESP, our proprietary leading indicator of earnings surprises, is showing Lennar Corp. coming out with a positive earnings surprise.
- For more details on Earnings ESP, check the ESP page here
Wednesday - 9/25
- We will get the August Durable Goods orders report before the market’s open, while the August New Home Sales numbers will come out a little later. Durable Goods orders are expected to be down -0.7% after July’s -7.4% decline, while New Home sales are expected to rise to 429K from July’s 394K level.
- AutoZone (AZO) is the only notable earnings report in the morning, while Jabil Circuit (JBL) and Bed, Bath & Beyond (BBBY) report after the close.
Thursday - 9/26
- Jobless Claims and the final look at the Q2 GDP report are on the economic docket.
- McCormick (MKC) is the only key report in the morning, while Nike (NKE) and Accenture (ACN) will report after the close.
- Nike’s positive Earnings ESP and Zacks Rank # 3 (Hold) show that the company is highly likely to come out with a positive earnings surprise.
Friday - 9/27
- The key economic report today is the September Personal Income & Outlays reading.
- Finish Line (FINL) and Vail Resorts (MTN) are the only notable reports today, all in the morning.
- BlackBerry (BBRY) was originally scheduled to report results this day, but preannounced those a week ahead of time where it took a ‘big bath,' announcing major layoffs and accounting charges.
Here is a list of the 27 companies reporting this week, including 10 S&P 500 members:
|Company||Ticker||Current Qtr||Year-Ago Qtr||Last EPS Surprise %||Report Day||Time|
|RED HAT INC||RHT||0.22||0.2||9.09||Monday||AMC|
|S&W SEED CO||SANW||0||-0.11||-75||Monday||AMC|
|CARMAX GP (:CC)||KMX||0.57||0.48||12.28||Tuesday||BTO|
|LENNAR CORP -A||LEN||0.46||0.34||30.3||Tuesday||BTO|
|MCCORMICK & CO||MKC||0.78||0.78||0||Thursday||BTO|
|USA TECH INC||USAT||0.02||-0.01||66.67||Friday||BTO|
ACCENTURE PLC (ACN): Free Stock Analysis Report KB HOME (KBH): Free Stock Analysis Report LENNAR CORP -A (LEN): Free Stock Analysis Report NIKE INC-B (NKE): Free Stock Analysis Report Zacks Investment Research