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Adobe Systems, FedEx, Oracle Alcoa and are part of Zacks Earnings Preview:

Zacks Equity Research

For Immediate Release
Chicago, IL – September 16, 2013 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Adobe Systems (ADBE-Free Report), FedEx (FDX-Free Report) and Oracle (ORCL-Free Report), Alcoa (AA-Free Report).
To see more earnings analysis, visit http://at.zacks.com/?id=3207.
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Fed in Focus as 2013 Q3 Earnings Season Gets Underway

The market’s focus is justifiably on the Fed this week, given expectations that the FOMC will start ‘Tapering’ its bond-purchase program. Also of interest will be the FOMC members’ updated economic forecasts and the Bernanke press conference where the outgoing Fed Chairman will try to explain their ‘Taper’ decision, or lack thereof.

Some in the market continue to hope that the Fed will hold off on the ‘Taper’ decision this week given the still-tepid economic picture and the potentially destabilizing upcoming budget and debt-ceiling debates in Congress. With the Syria debate now moving to the background, Congress’s attention will be shifting to these divisive topics in the coming days, not to mention a potentially noisy Senate confirmation battle for Larry Summers as the next Fed Chairman, should he get the nod as many speculations seem to suggest.

Please check out the very informative post by Nick Kalivas on the evolving monetary policy picture and the issues facing the Fed. Click here.

The Fed will no doubt be the big subject this week, but we are getting close to the start of the 2013 Q3 earnings season as well. In fact, the Q3 earnings season will actually get underway this week with the earning release from Adobe Systems (ADBE-Free Report) after the close on Tuesday, followed by reports from such bellwethers as FedEx (FDX-Free Report) and Oracle (ORCL-Free Report) on Wednesday.

Alcoa (AA-Free Report) typically gets credited for kick-starting each earnings season, but since we count all companies with quarters ending in August as part of our Q3 tally, the Q3 earnings season will have gotten underway weeks before Alcoa reports on October 8th. It will be interesting to see how much attention the aluminum giant’s earnings report will get this earnings season since it will have lost its position in the Dow Jones Industrial Average. In total, we have 20 companies reporting Q3 results this week, including 5 S&P 500 members.

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 +1.3% from the same period last year. This is down materially from what was expected at the start of the quarter in early July.
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.
Estimates for other sectors have come down as well, with even the Finance sector earnings expected to be up +7% now vs. the +8.1% that was expected in early July. Energy, Utilities, Conglomerates and even Construction have suffered negative revisions in varying degrees.
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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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