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Q1 Earnings Season Ramps Up

Sheraz Mian

Earnings results from the big banks highlight the benefits of diverse revenue streams, with JPMorgan (JPM) and Citigroup (C) offsetting decelerating loan growth trends with gains from their investment banking businesses. Wells Fargo (WFC) has been dealing lately with a number of company-specific issues, but the absence of a strong investment banking franchise was very much apparent in its earnings.

The loan growth deceleration in all of these reports didn’t come as a surprise - we had seen it in Fed data already. Some of the explanations offered include lower mortgage activity in the wake of higher rates, weak car loan demand and strong capital markets activities prompting big commercial and industrial borrowers to use the bond markets instead of banks.

But these explanations for the slowdown are far from satisfactory, particularly given the backdrop of steadily improving consumer and business confidence and expectations of ramped up U.S. economic growth. That said, the tepid loan demand picture is nevertheless a bigger issue for the regional banks that will be coming out with quarterly results this week. In total, we have 178 companies reporting Q1 results this week, including 61 S&P 500 members.

Finance Sector Scorecard

It is still fairly early, with results from only 4 Finance sector companies in the S&P 500 (out of 94 total) out already, but these 4 companies are the some of the largest in the entire index and account for 21.6% of the sector’s total market capitalization in the index. Total earnings for these 4 Finance sector companies are up +10.8% from the same period last year on +3% higher revenues, with all 4 beating EPS estimates but only 2 beating top-line estimates.

This is better earnings growth than we have seen from the same group of 4 banks in other recent periods, which is having a favorable impact on the aggregate Q1 growth expectation for the sector as a whole. The chart below compares the growth pace (earnings and revenue) and proportion of positive surprises for these 4 banks with what we saw from this same group of companies in other recent periods.

Total Q1 earnings for the Finance sector as a whole, combining the reported actuals with the still-to-come estimates, are expected to be up +11% from the same period last year. The table below shows the sector’s Q1 earnings growth expectations at the medium-industry level contrasted with estimates for the following four quarters and actual results for the preceding four periods.

Please note that the Major Banks industry, of which JPMorgan, Wells Fargo and others are part, accounts for roughly 45% of the sector’s total earnings (insurance is the second biggest earnings contributor, accounting for about 25% of the total).

Expectations for Q1 As a Whole

Total Q1 earnings are expected to be up +7.6% from the same period last year on +6.3% higher revenues. This would follow +7.4% earnings growth in 2016 Q4 on +4.7%, the highest growth pace in all most two years.

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

Please note that the Q1 earnings season follows 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.

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.

You can see 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.

Note: Sheraz Mian manages the Zacks equity research department. He is an acknowledged earnings expert whose commentaries and analyses appear on Zacks.com and in the print and electronic media. His weekly earnings related articles include Earnings Trends and Earnings Preview. He manages the Zacks Top 10 and Focus List portfolios and writes the Weekly Market Analysis article for Zacks Premium subscribers.

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Here is a list of the 177 companies including 61 S&P 500 members reporting this week.

Company Ticker Current Qtr Year-Ago Qtr Last EPS Surprise % Report Day Time
M&T BANK CORP MTB 1.94 1.87 -0.99% Monday BTO
NETFLIX INC NFLX 0.38 0.06 15.38% Monday AMC
UNITED CONT HLD UAL 0.35 1.23 7.88% Monday AMC
EQUITY LIFESTYL ELS 0.98 0.92 1.25% Monday AMC
FIRST DEFIANCE FDEF 0.74 0.78 6.58% Monday AMC
CONSOL TOMOKA CTO 1.91 0.25 -62.66% Monday AMC
SERVISFIRST BCS SFBS 0.4 0.33 14.29% Monday AMC
CELANESE CP-A CE 1.71 1.83 0.66% Monday AMC
BARRACUDA NTWRK CUDA 0.05 0.07 100.00% Monday AMC
BROWN & BROWN BRO 0.42 0.44 2.44% Monday AMC
PINNACLE FIN PT PNFP 0.76 0.71 0.00% Monday AMC
REEDS INC REED -0.01 -0.12 50.00% Monday AMC
Yahoo Inc YHOO 0.08 0.1 4.40% Monday N/A
REGIONS FINL CP RF 0.22 0.2 4.55% Tuesday BTO
UNITEDHEALTH GP UNH 2.18 1.81 1.93% Tuesday BTO
BANK OF AMER CP BAC 0.35 0.21 5.26% Tuesday BTO
HARLEY-DAVIDSON HOG 0.99 1.36 -15.63% Tuesday BTO
PROLOGIS INC PLD 0.63 0.61 0.00% Tuesday BTO
COMERICA INC CMA 1.01 0.34 4.21% Tuesday BTO
JOHNSON & JOHNS JNJ 1.77 1.68 1.28% Tuesday BTO
SCHWAB(CHAS) SCHW 0.37 0.29 0.00% Tuesday BTO
GRAINGER W W GWW 3.01 3.18 3.81% Tuesday BTO
GOLDMAN SACHS GS 5.38 2.68 6.72% Tuesday BTO
OMNICOM GRP OMC 0.96 0.9 1.38% Tuesday BTO
MERCANTILE BANK MBWM 0.43 0.52 6.52% Tuesday BTO
SYNOVUS FINL CP SNV 0.51 0.43 1.89% Tuesday BTO
LINCOLN ELECTRC LECO 0.78 0.76 0.00% Tuesday BTO
HANMI FINL CP HAFC 0.44 0.46 9.52% Tuesday BTO
TILE SHOP HLDGS TTS 0.14 0.14 -22.22% Tuesday BTO
GNC HOLDINGS GNC 0.33 0.69 -81.08% Tuesday BTO
LAM RESEARCH LRCX 2.54 1.18 2.28% Tuesday AMC
NAVIENT CORP NAVI 0.43 0.43 -2.27% Tuesday AMC
INTL BUS MACH IBM 2.34 2.35 2.45% Tuesday AMC
INTUITIVE SURG ISRG 3.97 3.67 0.76% Tuesday AMC
HANCOCK HLDG CO HBHC 0.57 0.09 4.92% Tuesday AMC
FULTON FINL FULT 0.23 0.22 0.00% Tuesday AMC
WESBANCO INC WSBC 0.6 0.6 1.72% Tuesday AMC
PZENA INVESTMNT PZN 0.13 0.09 7.14% Tuesday AMC
UNIVL FST PRODS UFPI 1.03 0.95 -6.85% Tuesday AMC
WINTRUST FINL WTFC 0.91 0.9 4.44% Tuesday AMC
CALAMP CORP CAMP 0.23 0.27 -14.29% Tuesday AMC
LEGACY TX FINL LTXB 0.58 0.43 -3.57% Tuesday AMC
ADTRAN INC ADTN 0.13 0.11 60.00% Tuesday AMC
EAGLE BCP INC EGBN 0.73 0.68 5.63% Tuesday AMC
FIRST CT BANCRP FBNK 0.24 0.23 8.00% Tuesday AMC
HOPE BANCORP HOPE 0.32 0.31 -6.06% Tuesday AMC
INTERACTIVE BRK IBKR 0.39 0.51 -78.13% Tuesday AMC
ROGERS COMM CLB RCI 0.43 0.35 0.00% Tuesday AMC
HUNTINGTON BANC HBAN 0.22 0.2 9.09% Wednesday BTO
US BANCORP USB 0.8 0.76 1.23% Wednesday BTO
TEXTRON INC TXT 0.46 0.55 -8.05% Wednesday BTO
BLACKROCK INC BLK 4.93 4.25 2.39% Wednesday BTO
MORGAN STANLEY MS 0.9 0.55 24.62% Wednesday BTO
GENUINE PARTS GPC 1.05 1.05 0.99% Wednesday BTO
ABBOTT LABS ABT 0.43 0.41 1.56% Wednesday BTO
SIGNATURE BANK SBNY 2.1 1.96 0.96% Wednesday BTO
LITHIA MOTORS LAD 1.77 1.55 -0.53% Wednesday BTO
ASML HOLDING NV ASML 0.99 0.51 25.47% Wednesday BTO
UNION BANKSHARS UBSH 0.43 0.38 6.67% Wednesday BTO
AKZO NOBEL NV AKZOY N/A 0.35 N/A Wednesday BTO
CSX CORP CSX 0.43 0.37 0.00% Wednesday AMC
UTD RENTALS INC URI 1.53 1.4 16.09% Wednesday AMC
AMER EXPRESS CO AXP 1.28 1.45 -7.14% Wednesday AMC
SL GREEN REALTY SLG 1.57 1.85 -0.69% Wednesday AMC
EBAY INC EBAY 0.4 0.41 -6.38% Wednesday AMC
TORCHMARK CORP TMK 1.14 1.08 3.57% Wednesday AMC
QUALCOMM INC QCOM 1.05 0.89 0.00% Wednesday AMC
TEXAS CAP BCSHS TCBI 0.88 0.49 5.49% Wednesday AMC
PREFERRED BANK PFBC 0.7 0.56 7.58% Wednesday AMC
SEI INVESTMENTS SEIC 0.52 0.46 7.84% Wednesday AMC
EXPONENT INC EXPO 0.46 0.4 14.71% Wednesday AMC
SIMMONS FIRST A SFNC 0.81 0.77 9.64% Wednesday AMC
LASALLE HTL PRP LHO 0.43 0.49 -1.59% Wednesday AMC
EAST WEST BC EWBC 0.75 0.74 7.04% Wednesday AMC
BRANDYWINE RT BDN 0.32 0.31 6.06% Wednesday AMC
BANCORPSOUTH BXS 0.38 0.39 8.11% Wednesday AMC
CROWN HLDGS INC CCK 0.7 0.69 0.00% Wednesday AMC
SELECT COMFORT SCSS 0.45 0.27 -21.88% Wednesday AMC
PTC INC PTC 0.16 0.11 -33.33% Wednesday AMC
SLM CORP SLM 0.15 0.14 0.00% Wednesday AMC
STEEL DYNAMICS STLD 0.79 0.26 0.00% Wednesday AMC
TRIUMPH BANCORP TBK 0.37 0.27 -15.38% Wednesday AMC
WOODWARD INC WWD 0.67 0.65 46.00% Wednesday AMC
CYS INVESTMENTS CYS 0.26 0.19 0.00% Wednesday AMC
PLEXUS CORP PLXS 0.76 0.55 7.89% Wednesday AMC
CATHAY GENL BCP CATY 0.61 0.57 -1.64% Wednesday AMC
COHEN&STRS INC CNS 0.47 0.42 0.00% Wednesday AMC
HNI CORP HNI 0.22 0.31 -3.53% Wednesday AMC
RLI CORP RLI 0.48 0.54 19.15% Wednesday AMC
BENCHMARK ELETR BHE 0.26 0.26 9.76% Wednesday AMC
IDEX CORP IEX 0.93 0.89 3.23% Wednesday AMC
CDN PAC RLWY CP 1.9 1.82 -3.80% Wednesday AMC
HEXCEL CORP HXL 0.63 0.59 3.23% Wednesday AMC
CORE LABS NV CLB 0.39 0.37 0.00% Wednesday AMC
UMPQUA HLDGS CP UMPQ 0.26 0.29 -10.00% Wednesday AMC
BADGER METER BMI 0.26 0.28 -8.70% Wednesday AMC
KAISER ALUMINUM KALU 1.12 1.51 4.10% Wednesday AMC
VALMONT INDS VMI 1.62 1.49 8.78% Wednesday N/A
TD AMERITRADE AMTD 0.41 0.38 0.00% Wednesday N/A
QUEST DIAGNOSTC DGX 1.18 1.12 3.15% Thursday BTO
DANAHER CORP DHR 0.84 1.08 1.94% Thursday BTO
SHERWIN WILLIAM SHW 2.07 1.81 5.41% Thursday BTO
D R HORTON INC DHI 0.59 0.52 17.02% Thursday BTO
VERIZON COMM VZ 0.98 1.06 -3.37% Thursday BTO
BB&T CORP BBT 0.7 0.69 0.00% Thursday BTO
KEYCORP NEW KEY 0.28 0.24 6.90% Thursday BTO
PPG INDS INC PPG 1.31 1.31 0.85% Thursday BTO
DOVER CORP DOV 0.6 0.52 -15.48% Thursday BTO
CITIZENS FIN GP CFG 0.51 0.41 3.77% Thursday BTO
TRAVELERS COS TRV 2.38 2.33 21.67% Thursday BTO
BANK OF NY MELL BK 0.8 0.74 -1.28% Thursday BTO
PEOPLES UTD FIN PBCT 0.22 0.21 0.00% Thursday BTO
SNAP-ON INC SNA 2.34 2.16 2.49% Thursday BTO
ALLIANCE DATA ADS 3.65 3.63 0.91% Thursday BTO
NUCOR CORP NUE 1.13 0.22 47.06% Thursday BTO
SCORPIO BULKERS SALT -0.21 -1.12 -16.00% Thursday BTO
MGIC INVSTMT CP MTG 0.24 0.19 27.27% Thursday BTO
HOME BANCSHARES HOMB 0.32 0.29 6.06% Thursday BTO
S&T BANCORP INC STBA 0.53 0.46 -5.56% Thursday BTO
LAWSON PRODUCTS LAWS 0.1 0.12 -6.25% Thursday BTO
BLACKSTONE GRP BX 0.69 0.31 7.94% Thursday BTO
SONOCO PRODUCTS SON 0.59 0.65 -1.59% Thursday BTO
IMAX CORP IMAX 0.04 0.14 8.33% Thursday BTO
JANUS CAP GRP JNS 0.21 0.19 -16.67% Thursday BTO
GATX CORP GATX 1.08 1.62 8.57% Thursday BTO
SUNCOKE ENERGY SXCP 0.26 0.64 -24.27% Thursday BTO
ABB LTD-ADR ABB 0.24 0.23 22.22% Thursday BTO
KCG HOLDINGS KCG 0.01 0.41 -385.71% Thursday BTO
SUNCOKE ENERGY SXC -0.1 0.05 -40.91% Thursday BTO
CELESTICA INC CLS 0.22 0.2 21.43% Thursday BTO
DATAWATCH CORP DWCH -0.07 -0.23 -50.00% Thursday BTO
NEUROMETRIX INC NURO -0.49 -1.02 30.67% Thursday BTO
CONTROLADORA VL VLRS -0.24 0.34 64.29% Thursday BTO
VISA INC-A V 0.79 0.68 10.26% Thursday AMC
MATTEL INC MAT -0.17 -0.13 -26.76% Thursday AMC
E TRADE FINL CP ETFC 0.39 0.43 2.38% Thursday AMC
GLACIER BANCORP GBCI 0.41 0.38 0.00% Thursday AMC
WESTERN ALLIANC WAL 0.69 0.6 2.94% Thursday AMC
FCB FINL HLDGS FCB 0.63 0.53 0.00% Thursday AMC
FIRST FIN BC-OH FFBC 0.35 0.32 2.70% Thursday AMC
NCR CORP-NEW NCR 0.46 0.38 3.88% Thursday AMC
QCR HLDGS INC QCRH 0.63 0.52 3.23% Thursday AMC
ASSOC BANC CORP ASB 0.31 0.27 6.25% Thursday AMC
MAXIM INTG PDTS MXIM 0.52 0.41 6.98% Thursday AMC
EASTGROUP PPTYS EGP 0.98 0.91 0.93% Thursday AMC
HAWAIIAN HLDGS HA 0.85 0.8 -1.54% Thursday AMC
PROOFPOINT INC PFPT -0.35 -0.54 -26.92% Thursday AMC
BASIC EGY SVCS BAS -0.86 -99.99 -7.27% Thursday AMC
BRIGGS & STRATT BGG 0.81 0.8 20.69% Thursday AMC
TRISTATE CP HLD TSC 0.24 0.21 17.39% Thursday AMC
CLEARWATER PAPR CLW 0.69 1.07 -3.53% Thursday AMC
ELECTRN IMAGING EFII 0.05 0.04 59.26% Thursday AMC
MANHATTAN ASOC MANH 0.34 0.38 7.69% Thursday AMC
EQUITY BANCSHRS EQBK 0.29 0.41 562.50% Thursday AMC
INDEP BK MASS INDB 0.71 0.72 2.70% Thursday AMC
NATIONAL BK HLD NBHC 0.24 0.23 56.52% Thursday AMC
WERNER ENTRPRS WERN 0.21 0.28 15.38% Thursday AMC
SANDY SPRING SASR 0.54 0.45 1.85% Thursday N/A
GRUPO AEROP-ADS OMAB N/A 0.42 14.29% Thursday N/A
SUNTRUST BKS STI 0.84 0.84 2.27% Friday BTO
STANLEY B&D INC SWK 1.19 1.32 1.79% Friday BTO
HONEYWELL INTL HON 1.62 1.53 0.00% Friday BTO
KANSAS CITY SOU KSU 1.16 1.03 -4.27% Friday BTO
ROCKWELL COLLIN COL 1.31 1.3 4.35% Friday BTO
GENL ELECTRIC GE 0.17 0.21 0.00% Friday BTO
INTERPUBLIC GRP IPG 0.02 0 13.64% Friday BTO
NEXTERA ENERGY NEE 1.55 1.55 -6.20% Friday BTO
SCHLUMBERGER LT SLB 0.26 0.4 0.00% Friday BTO
STEVEN MADDEN SHOO 0.44 0.33 0.00% Friday BTO
WABCO HOLDINGS WBC 1.44 1.37 2.08% Friday BTO
WEBSTER FINL CP WBS 0.57 0.51 9.09% Friday BTO
GENTEX CORP GNTX 0.31 0.28 -3.12% Friday BTO
MANPOWER INC WI MAN 1.1 0.98 5.88% Friday BTO
NEXTERA ENERGY NEP 0.41 0.14 145.95% Friday BTO
SOUTH STATE CP SSB 1.13 1.04 0.00% Friday BTO
CAPITAL BNK FIN CBF 0.44 0.38 2.33% Friday BTO
AMERIS BANCORP ABCB 0.6 0.5 10.71% Friday BTO
TECNOGLASS INC TGLS 0.11 0.17 -21.05% Friday AMC


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