For Immediate Release
Chicago, IL – June 18, 2019 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Costco COST, AutoZone AZO, Adobe Systems ADBE, Oracle ORCL and Applied Materials AMAT.
Looking Ahead to Q2 Earnings Season
It is too early to start talking about the 2019 Q2 earnings season, as we are almost a month away from the big banks (unofficially) kicking-off the latest reporting cycle. It is only in the run up to these bank releases that everyone starts paying attention to start of another earnings season. Unfortunately for us, we don’t have the luxury to wait that long as we are responsible for maintaining the ‘books’ on every earnings season.
From our standpoint, the 2019 Q2 earnings season has actually gotten underway already. The Costco and AutoZone earnings releases a couple of weeks back were for the two companies’ fiscal quarters ending in May, which we count as part of our June-quarter tally. We have another 5 S&P 500 members on deck to report results for their fiscal quarters ending in May this week, including Adobe Systems and Oracle.
The bulk of 2019 Q2 results will be comprised of companies coming out with fiscal June-quarter results. But as we all know, fiscal and calendar quarters don’t match for all companies, as is the case with Adobe, Oracle, AutoZone, Costco and many others whose fiscal quarters ended in May. We club such fiscal May-quarter results as part of our June-quarter tally.
Looked at this way, the 2019 Q2 earnings season has officially gotten underway already. The fact is that by the time the big banks come around to report June-quarter results on July 14th, we will have seen such Q2 results from almost two dozen S&P 500 members already.
Expectations for 2019 Q2 & Beyond
Tough comparisons to last year when growth was boosted by the tax cut legislation were all along expected to weigh on earnings growth in 2019. Moderating U.S. economic growth and notable slowdowns in other major global economic regions are having a further negative impact. Uncertainty about the global trade regime and growing resort to tariffs are not helping matters either.
As a result, earnings were essentially flat in the first quarter of 2019 and no significant improvement is expected in the growth trajectory in the June quarter either. In fact, this trend of flat to negative growth is expected to persist through the September quarter, with current consensus estimates looking for positive growth resuming in the last quarter of the year. But Q4 is still far from away and a lot can happen between now and then.
The mid-single digits earnings growth for the S&P 500 index currently expected in Q4 is partly a function of the Tech sector stopping to become a drag on overall index growth. But the semiconductor space may have to endure further pain, as we saw with the Applied Materials report.
For the June quarter, the expectation currently is that earnings for the S&P 500 index will decline by -3.1% from the same period last year on +4.3% higher revenues, with 9 of the 16 Zacks sectors expected to have negative earnings growth, including the Tech sector.
The overall tone and substance of management guidance during the last earnings season was on the negative side. This reflected a combination of slowing economic growth, particularly beyond the U.S., and rising input expenses. As a result, analysts steadily lowered their estimates for 2019 Q2
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AutoZone, Inc. (AZO) : Free Stock Analysis Report
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Adobe Systems Incorporated (ADBE) : Free Stock Analysis Report
Costco Wholesale Corporation (COST) : Free Stock Analysis Report
Applied Materials, Inc. (AMAT) : Free Stock Analysis Report
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