For Immediate Release
Chicago, IL – September 3, 2013 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes H&R Block ( HRB- Free Report), Dollar General (DG- Free Report), SAIC (SAI- Free Report), Wal-Mart (WMT- Free Report) and Macy’s (M- Free Report).
To see more earnings analysis, visit http://at.zacks.com/?id=3207.
Every day, Zacks.com makes their Bull Stock of the Day available, free of charge. To see it, click here.
Economy in Focus as Earnings Come to a Close
Earnings aren’t the big news this week, with the focus squarely on top-tier economic reports about jobs and the broader economy. The market will be reading these reports with the Fed’s coming meeting in mind, weighing the odds whether the September 17/18 FOMC meeting will finally usher in the long-awaited ‘Taper’.
The Real Time Insight post from my colleague Nick Kalivas captures the issue very nicely – Are We Beyond QE?
The earnings season may no longer be front and center, but it isn’t (technically) over yet, with 41 companies coming out with results this week, including 3 S&P 500 members. For all practical purposes, however, the Q2 earnings season is already over, with results from 494 S&P 500 companies already out (as of Friday, August 30th). Only three of the 16 Zacks sectors have a few reports still awaited and this week’s reports from H&R Block (HRB- Free Report), Dollar General (DG- Free Report) and SAIC (SAI- Free Report) will push us further to the finish line.
Most of the recent results have been from the Retail sector and they have broadly been on the weak side. The soft tone set by results from Wal-Mart (WMT- Free Report), Macy’s (M- Free Report) and others earlier in the sector’s reporting cycle largely remained in place, with most of the apparel and other soft-line retailers failing to impress. The Q2 earnings and revenue growth numbers for the sector aren’t bad; they are in fact better than what the sector produced in Q1 and the last few quarters.
But many more retailers came out short of expectations, with the earnings and revenue beat ratios for Q2 materially weaker than Q1 and the four-quarter average. The overall tone of guidance was on the weak side as well, prompting analysts to cut their estimates for the sector. Total earnings for the sector are expected to be up +6.5% in Q3, down from +17.3% growth pace expected in mid-July.
The downward adjustment to Q3 expectations is fairly pronounced in Retail, but the issue is hardly confined this sector alone, as estimates have come down for all sectors. Total earnings in Q3 for the S&P 500 as a while are currently expected to up +1.9% from the same period last year, which is down from +5.2% expected in early July. Basic Materials, Industrials, and Technology are the other major sectors experiencing material negative estimate revisions.
The Q2 Earnings Scorecard
Total earnings for the 494 S&P 500 companies that have reported results already are up +2.5%, with 65.6% beating earnings expectations and a median surprise of +2.9%. Most of this growth has come from top-line gains, with total revenues for these 494 companies up +1.9% and 51.8% beating revenue expectations, with a median revenue surprise of +0.2%.
The earnings growth rate of +2.5% compares to +2.3% earnings growth rate in Q1 and the 4-quarter average growth pace of +2.8% for the same set of 494 companies. The earnings beat ratio, which was tracking a bit lower earlier in the reporting cycle, eventually caught on with historical levels. On the revenue side, the growth of +1.9% compares to +1.6% in Q1 and the 4-quarter average of +2.8% for this group of 494 S&P 500 companies. The revenue beat ratio of 51.8%, however, is decidedly better than what we saw in Q1 (42.1%) and the 4-quarter average (45.9%).
Strong results from the Finance sector played a big role in giving respectability to the aggregate Q2 data. It is very hard to be satisfied with the picture once Finance is excluded from the numbers. Total Finance sector earnings are up +30% on +8.5% higher revenues, with beat ratios of 76.9% for earnings and 65.4% for revenues. Finance’s performance has been way better than what we have seen from the group in recent quarters.
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.
Zacks "Profit from the Pros" e-mail newsletter offers continuous coverage of the industries and the stocks poised to outperform the market. Click to subscribe to this free newsletter today.
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros.
Get the full Report on HRB - FREE
Get the full Report on DG - FREE
Get the full Report on SAI - FREE
Get the full Report on WMT - FREE
Get the full Report on M - FREE
Follow us on Twitter: https://twitter.com/zacksresearch
Join us on Facebook: https://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks Investment Research
800-767-3771 ext. 9339
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
More From Zacks.com