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Q1 Earnings Season Preview

Sheraz Mian

We are still three weeks away from the Q1 earnings season ramping up, but the reporting cycle has gotten underway already with earnings reports from 12 S&P 500 members already out. All of these initial Q1 earnings reports are from companies that have their fiscal quarters ending in February, which form part of our Q1 earnings tally.

The chart below shows the weekly reporting calendar for the S&P 500 index, with this week bringing in results from 5 index members.

This Week’s Key Reports

Red Hat (RHT) – Red Hat reports after the market’s close on Monday, March 27th, with the company expected to earn 39 cents per share on $618.5 million in revenues, up +14.4% and +13.8% from the year-earlier level, respectively. The stock was down big after the last earnings report on December 21st, but has impressive gains this year – up +19.5% in the year-to-date period, outperforming the Zacks Tech sector’s +8.9% gain (the S&P 500 index is up +4.7% in that same time period).

Darden Restaurants (DRI) – Darden reports results before the market’s open on Tuesday, March 28th, with company expected to earn $1.27 per share on $1.86 billion in revenues, up +5.8% and +1% from the year-earlier period, respectively. The company’s improved comp and margin outlook has helped the stock outperform the broader market as well as the peer restaurant industry, with the stock up +5.6% in the year-to-date period vs. a decline of -1.2% for the Zacks Restaurants industry. The last two earnings reports were not big movers of the stock, but this report could be material given the stock’s strong recent gains.

Dave & Buster’s (PLAY) is another restaurant operator reporting results on Tuesday, March 28th. This is a relatively young player, having gone public only in the fall of 2014, with the stock up an impressive +251% since the October 2014 IPO on the back of the company’s strong growth profile. Dave & Buster’s shares are up +7.8% in the year-to-date period vs. -1.2% decline for the Zacks Restaurants industry. The last few earnings reports were big stock price movers, with the stock up big following the December quarter report when it beat on the top- and bottom lines.

Paychex (PAYX) – Payroll processor Paychex reports results before the market’s open on Wednesday, March 29th. The company is expected to earn $0.54 per share on $798.4 million in revenues, up +7.6% on +6.1% higher revenues from the year-earlier period, respectively.

Expectations for Q1

Total Q1 earnings are expected to be up +6.4% from the same period last year on +6.4% higher revenues. This would follow +7.3% earnings growth in 2016 Q4 on +4.7%, the highest growth pace in all most two years.

Estimates for Q1 have come down as the quarter has unfolded, with the current +6.4% growth down from +10.4% at the end of December. The chart below shows how Q1 earnings growth expectations have evolved over the last three months.

Please note that while Q1 estimates have followed well traversed path that we have been seeing consistently over the last few years, the magnitude of negative revisions compares favorably to other periods, particularly in the first half of last year and all of 2015. In other words, Q1 estimates have come down, but they haven’t come down by as much.

The table below shows the summary picture for Q1, contrasted with what was actually achieved in Q4.

Please note that the Q1 earnings season would follow the strong showing on the earnings front in the preceding reporting cycle. Not only did 2016 Q4 growth reach the highest in two years, but total earnings for the quarter also reached a new quarterly record. The strong Q4 performance came after the first positive earnings growth in 2016 Q3, having declined in each of the preceding 5 quarters, as the chart below of year-over-year earnings growth for the S&P 500 index shows.

Expectations Beyond Q1

The chart below shows the Q1 earnings growth contrasted with what is expected in the following three quarters and actual results in the preceding 5 quarters. As you can see in the chart below, the growth pace is expected to ramp up in 2017.

The market is reflecting this improved earnings backdrop as the chart below of the S&P 500 relative to forward 12-month Zacks Consensus estimates shows.

Please note that the earnings backdrop has not changed in any meaningful way since the November elections, notwithstanding the market’s strong gains since then. The only exception to this comment is the Finance sector whose earnings outlook has improved as a result of the uptrend in interest rates since November 8th. It is reasonable to expect that earnings estimates will move favorably once the new administration’s growth-friendly policies get enacted. For now, however, estimates are following the long-established trend of coming down.  

Note: Sheraz Mian heads the Zacks Equity Research department and is a well-regarded expert of aggregate earnings. He is frequently quoted in the print and electronic media and publishes the weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here >>>

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Here is a list of the 84 companies including 5 S&P 500 members reporting this week.


 

Company Ticker Current Qtr Year-Ago Qtr Last EPS Surprise % Report Day Time
ZYNERBA PHARMA ZYNE -0.73 -0.62 0.00% Monday BTO
G-III APPAREL GIII -0.09 0.17 -1.96% Monday BTO
GLOBAL MED REIT GMRE 0.01 N/A -175.00% Monday BTO
ONCONOVA THERAP ONTX N/A 1.8 -42.11% Monday BTO
GAZIT GLOBE LTD GZT N/A 0.29 N/A Monday BTO
VASCULAR BIOGNC VBLT -0.16 -0.14 20.00% Monday BTO
CAL-MAINE FOODS CALM 0.16 1.33 0.00% Monday BTO
RED HAT INC RHT 0.39 0.34 13.51% Monday AMC
WESTPORT FUEL WPRT -0.15 -0.35 39.13% Monday AMC
GRUPO AVAL SA AVAL 0.21 0.2 26.67% Monday AMC
FOUNDATION BLDG FBM -0.1 N/A N/A Monday AMC
SYNNEX CORP SNX 1.66 1.37 22.97% Monday AMC
AUXILIO INC AUXO 0.08 0.18 N/A Monday AMC
DIGITAL ALLY IN DGLY N/A -0.51 -286.67% Monday AMC
SELECTA BIOSCI SELB 0.32 N/A 10.42% Monday AMC
COPEL-ADR PR B ELP N/A 0.38 N/A Monday N/A
DARDEN RESTRNT DRI 1.27 1.21 1.59% Tuesday BTO
CARNIVAL CORP CCL 0.35 0.39 15.52% Tuesday BTO
MCCORMICK & CO MKC 0.75 0.74 0.00% Tuesday BTO
FACTSET RESH FDS 1.8 1.59 2.94% Tuesday BTO
RENESOLA LT-ADR SOL -0.8 0.35 -25.00% Tuesday BTO
AT HOME GRP INC HOME 0.27 N/A 50.00% Tuesday BTO
IHS MARKIT LTD INFO 0.37 0.26 5.56% Tuesday BTO
GALECTIN THERAP GALT N/A -0.19 13.64% Tuesday BTO
EVOTEC AG-ADR EVTCY N/A 0.09 850.00% Tuesday BTO
OREXIGEN THERAP OREX -0.54 -1.2 52.58% Tuesday BTO
SUPERCOND TECH SCON -0.55 -1.2 0.00% Tuesday BTO
ASTERIAS BIOTHR AST -0.17 -0.21 11.76% Tuesday AMC
CYCLACEL PHARMA CYCC -0.73 -1.2 8.51% Tuesday AMC
SONIC CORP SONC 0.15 0.18 9.09% Tuesday AMC
OLLIES BGN OUTL OLLI 0.35 0.31 21.43% Tuesday AMC
DAVE&BUSTRS ENT PLAY 0.58 0.53 92.31% Tuesday AMC
LAUREATE EDUCAT LAUR 0.29 N/A N/A Tuesday AMC
WESTMORELAND CO WLB 0.71 -1.06 -239.39% Tuesday AMC
INTELGENX TECH IGXT N/A 0 100.00% Tuesday AMC
VERINT SYSTEMS VRNT 0.63 0.72 5.41% Tuesday AMC
ROMACO RESOURCS METC N/A N/A N/A Tuesday AMC
WOLSELEY -ADR WOSYY N/A N/A N/A Tuesday N/A
PAYCHEX INC PAYX 0.54 0.5 1.82% Wednesday BTO
UNIFIRST CORP UNF 1 1.16 -12.66% Wednesday BTO
INTL SEAWAYS INSW 0.31 N/A N/A Wednesday BTO
SECUREWORKS CP SCWX -0.06 -0.13 55.56% Wednesday BTO
OMNOVA SOLUTION OMN 0.05 0.04 0.00% Wednesday BTO
SUNWORKS INC SUNW -0.14 0.06 -341.67% Wednesday BTO
LULULEMON ATHLT LULU 1.01 0.85 9.30% Wednesday AMC
WILDHORSE RESRC WRD 0.07 N/A N/A Wednesday AMC
MARRONE BIO INV MBII -0.29 -0.45 -31.82% Wednesday AMC
SIGMA DESIGNS SIGM -0.21 -0.02 400.00% Wednesday AMC
EXFO INC EXFO 0.04 0.06 40.00% Wednesday AMC
GEVO INC GEVO -0.96 -8.8 0.00% Wednesday AMC
PROGRESS SOFTWA PRGS 0.2 0.18 14.58% Wednesday AMC
FULLER(HB) CO FUL 0.49 0.43 -1.33% Wednesday AMC
FORTERRA INC FRTA 0.01 N/A N/A Wednesday AMC
WORTHINGTON IND WOR 0.67 0.46 -6.25% Wednesday AMC
SCIENCE APP INT SAIC 0.8 0.74 8.33% Thursday BTO
TITAN MACHINERY TITN -0.19 -1.31 -116.67% Thursday BTO
NEURODERM LTD NDRM -0.47 -0.31 0.00% Thursday BTO
ALDEYRA THERAPT ALDX -0.51 -0.47 7.32% Thursday BTO
AFFIMED THERAP AFMD -0.3 -0.21 -40.00% Thursday BTO
CLEAN DIESEL CDTI -0.14 0.05 -34.78% Thursday BTO
LINDSAY CORP LNN 0.38 0.42 -87.30% Thursday BTO
ANGIODYNAMICS ANGO 0.15 0.15 18.75% Thursday BTO
CHINA AUTO SYS CAAS N/A 0.22 50.00% Thursday BTO
HENNES&MAURIT HNNMY N/A 0.04 14.29% Thursday BTO
INVENTURE FOODS SNAK -0.07 -0.08 -533.33% Thursday BTO
LIQTECH INTL LIQT -0.01 0 -300.00% Thursday BTO
EAGLE BULK SHPG EGLE -0.26 -42.4 N/A Thursday AMC
MARATHON PATENT MARA -0.36 -0.07 -68.00% Thursday AMC
DICERNA PHARMA DRNA -0.73 -0.76 21.84% Thursday AMC
FRANKLIN COVEY FC -0.22 -0.03 -163.64% Thursday AMC
UNI-PIXEL INC UNXL -0.14 -0.47 -41.67% Thursday AMC
AEHR TEST SYS AEHR -0.08 -0.23 -28.57% Thursday AMC
NETLIST INC NLST -0.07 -0.09 11.11% Thursday AMC
RXI PHARMACEUT RXII N/A -0.4 0.00% Thursday AMC
SOCIAL REALITY SRAX -0.24 -0.05 -66.67% Thursday AMC
ONE GROUP HOSP STKS N/A 0.18 700.00% Thursday AMC
UQM TECH INC UQM N/A -0.03 -66.67% Thursday AMC
WIDEPOINT CORP WYY N/A -0.01 100.00% Thursday AMC
VOXELJET AG-ADR VJET N/A -0.14 -133.33% Thursday AMC
PARKERVISION PRKR N/A -3.3 N/A Thursday AMC
BLACKBERRY LTD BBRY -0.04 -0.06 75.00% Friday BTO
SORL AUTO PARTS SORL N/A 0.31 6.25% Friday BTO
MEDICAL TRANSCR MTBC N/A -0.01 90.91% Friday BTO
FLEXIBLE SOLTNS FSI N/A 0.03 -50.00% Friday AMC


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