For Immediate Release
Chicago, IL – December 9, 2019 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes AutoZone AZO, Oracle ORCL, Costco COST, Adobe Systems ADBE and JPMorgan JPM.
Previewing Q4 Earnings Season
The December-quarter reporting season will not take the spotlight till we get into the New Year and the big banks start reporting results in mid-January. But the reporting season will actually get underway this week with Tuesday’s earnings release from AutoZone followed by reports from Oracle, Costco and Adobe Systems on Thursday.
All of these companies will be releasing results for their fiscal quarters ending in November, which we count as part of the December-quarter tally. In fact, by the time JPMorgan comes out with Q4 report on January 14, 2020, we will have seen such November-quarter results from almost two dozen S&P 500 members.
This earnings season is not expected to change the market’s earnings view in any meaningful way. Growth has been constrained in the first three quarters of 2019 and results of the last quarter of the year are not expected to be any different. A big contributing factor holding growth back has been tough comparisons to the very high levels of profitability in 2018 when earnings were boosted by the tax cut legislation. We will see this factor at play in the Q4 earnings season as well. But the expectation is that positive growth resumes in 2020, which we will show below.
For 2019 Q4, total earnings (or aggregate net income) for the S&P 500 index are expected to be down -3.5% from the same period last year on +3% higher revenues, with 10 of the 16 Zacks sectors expected to have lower earnings than the year-earlier period.
As is typically the case, estimates for the period came down as the quarter got underway.
The magnitude of negative revisions that Q4 estimates suffered is in-line with historical trends for comparable periods.
Estimates have come down across the board, with 15 of the 16 Zacks sectors suffering negative revisions (Utilities is the only sector where estimates modestly ticked up). But not all sectors experienced the same magnitude of estimate cuts. Of the two biggest earnings contributors – Finance & Technology – estimates came down a lot more for the Finance sector than for the Technology space.
Sectors experiencing the biggest negative revisions include Autos, Aerospace, Industrial Products and Basic Materials.
The Autos sector was expected to enjoy earnings growth of +6.1% at the start of October, which has now dropped to a decline of -56.4%. This dramatic shift is primarily a function of how estimates for General Motors (GM) have evolved lately, with the current Zacks Consensus EPS of 6 cents for the automaker in Q4 down from $1.77 two months back.
Estimates for full-year 2020 have come down over the last few months, but they still represent a material acceleration from the 2019 pace. The way 2020 Q1 and full-year 2020 expectations evolve in the coming weeks and months will depend to a large extent on management guidance and commentary as 2019 Q4 results come out.
For a complete analysis of Q4 expectations and the overall earnings picture, including expectations for the small-cap S&P 600 index, please check our weekly Earnings Trends report here. The latest Earnings Trends report is titled >>> Looking Ahead to the Q4 Earnings Season
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JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report
AutoZone, Inc. (AZO) : Free Stock Analysis Report
Oracle Corporation (ORCL) : Free Stock Analysis Report
Adobe Systems Incorporated (ADBE) : Free Stock Analysis Report
Costco Wholesale Corporation (COST) : Free Stock Analysis Report
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