For Immediate Release
Chicago, IL – June 22, 2020 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes JPMorgan JPM, Adobe ADBE, Nike NKE, Accenture ACN and Darden DRI.
Q2 Earnings Season to Provide Coronavirus Earnings Clarity
The Covid-19 pandemic and the associated shelter-in-place policies brought the U.S. economy to a standstill in April and May, with something resembling ‘normal’ activities only now getting underway in large parts of the country.
Recent economic and labor market readings show that the pandemic’s most horrendous effects on the economy have started easing. The hope is that since the U.S. economy entered the pandemic in fairly good shape, we will get back to stronger economic growth in the coming months.
While there is broad agreement in the market over this general view of the recovery, there is disagreement over the pace and magnitude of recovery. It is this aspect of the recovery debate that morphs into the letter shape that the recovery will take (the so-called ‘V’, ‘U’, ‘W’, or ‘L’ shapes).
This debate about economic recovery has implications for corporate earnings, which along with interest rates, drives stock prices in the long run.
Earnings estimates fell sharply as the pandemic’s full effects became clear, with full-year 2020 earnings estimate dropping from a roughly +8% growth in early January to a decline of -24.1% today. But the negative revisions trend has eased in recent weeks, which can be interpreted as reflecting the effects of the economy’s reopening. We will know more in the coming weeks as the Q2 earnings season gets underway and management teams share what they see on the ground in their respective industries.
Management teams were completely clueless back in April when they reported Q1 results, with most withdrawing their previously issued public guidance. It is reasonable to expect relatively more clarity this time around, which should help anchor expectations for the second half and beyond.
Growth is expected to resume next year, with full-year 2021 earnings for the S&P 500 index currently expected to be up +26.8% relative to 2020 estimates. But as strong as next year’s growth estimate is, total 2021 index earnings would still haven’t gotten back to pre-Covid levels.
In other words, S&P 500 earnings in 20201 are currently expected to be modestly below the 2019 level.
These numbers translate to an index ‘EPS’ of $155.18 in 2021 vs. $122.36 in 2020 and $161.21 in 2019.
Q2 Earnings Season Gets Underway
We mentioned earlier, the Q2 reporting cycle will (unofficially) get underway with the JPMorgan report on July 14th. But from our perspective, the Q2 earnings season has gotten underway already, with the Adobe report on Thursday, June 11th, as the third earnings release that we have results from 7 S&P 500 members already out.
Nike, Accenture and Darden are among the 5 index members on deck to report results this week. By the time we JPMorgan reports its Q2 results on July 14th, we will have seen such results from almost two dozen S&P 500 members.
For the 7 index members that have reported already, total Q2 earnings or aggregate net income is down -44.3% on -2.4% lower revenues, with 71.4% (5 out of 7) beating EPS estimates and 28.6% (2 out of 7) beating revenue estimates.
15 of the 16 Zacks sectors are expected to have lower earnings relative to the year-earlier period, with 4 of the 16 sectors expected to lose money in Q2 (decline rates in excess of -100%). These three sectors are unsurprisingly Energy (Q2 earnings expected to decline -138.5%), Transportation (-152.9%), Autos (-224.8%) and Consumer Discretionary (-109.1%).
Finance and Technology, the two biggest earnings contributors to the S&P 500 index, are expected to show Q2 earnings declines of -38.8% and -13.5%. In fact, Tech’s -13.3% decline is the smallest earnings decline of the 15 sectors that will experience declines in Q2 (Utilities is the only sector that is expected to show a modest growth).
For an in-depth look at the overall earnings picture and expectations for the coming quarters, please check out our weekly Earnings Trends report >>>> Q2 Earnings Season Preview
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JPMorgan Chase Co. (JPM) : Free Stock Analysis Report
NIKE, Inc. (NKE) : Free Stock Analysis Report
Darden Restaurants, Inc. (DRI) : Free Stock Analysis Report
Adobe Systems Incorporated (ADBE) : Free Stock Analysis Report
Accenture PLC (ACN) : Free Stock Analysis Report
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