We all know that the third quarter earnings season has been quite weak. In fact, with more than 95% of the earnings reports already out, we could start referring to it in the past tense. Any way you look at it, this was the weakest quarterly earnings season since the current earnings cycle got underway in 2009.
Not only were the actual results quite weak, but the overall tone of management guidance was also quite downbeat. As a result, expectations for the fourth quarter have steadily come down since the start of the third quarter reporting season. The Zacks Consensus expectation for the fourth quarter was looking for earnings growth in excess of 7% at the beginning of last month, which has now come down to a far more reasonable-looking 3.3% growth pace. But even as expectations for the fourth quarter have come down, we haven’t seen the same level of downward revisions to full-year 2013 expectations, which is looking for growth rate in excess of 10%.
It is appropriate to start looking ahead to the fourth quarter reporting season, but we have yet to close the books on the third quarter. As of Friday, November 16th, we have third quarter earnings from 476 companies in the S&P 500 or 95.2% of the index’s total membership. The reporting season has ended for 9 of the 16 Zacks sectors, with the remaining companies mostly in the Retail sector and a sprinkling of Technology and Industrial operators.
We have a total of 70 companies reporting this holiday-shortened week, including 13 from the S&P 500. By the end of this week, we will have results from 489 of the S&P 500 companies or 98% of the index’s total membership.
While this week’s earnings reports will not change the overall narrative on this earnings season, we do have a number of important companies whose commentary on the outlook for the fourth quarter and beyond will further add to our understanding of the evolving earnings picture. I would put this week’s reports from Salesforce.com (CRM), Deere & Company (DE), Lowe’s (LOW) and Agilent (A) in that category. Best Buy (BBY) and Hewlett-Packard (HPQ) are also on the docket for this week, but these struggling giants no longer carry the punch they used to in the past.
With respect to a third quarter scorecard for the 476 companies that have already reported results, total earnings are down 4.7% from the same period last year and only 62.6% of the companies came out with positive earnings surprises. Total revenues are down 9.9%, with only 38.7% of the companies beating revenue expectations. The numbers look even weaker once Finance is excluded. Excluding Finance, total earnings in the quarter were down 9.8%, the weakest reading we have seen in quite a while.
We always whine that ‘earnings surprises’ have lost their punch since management teams have become adept at managing expectations. The third quarter earnings season ran counter to this narrative, as the surprises this time around have predominantly been on the negative side. May be the redeeming feature of this earnings season is that the underperformance this time around restores our confidence in the earnings surprise all over again.
Monday - 11/19
- We have the October Existing Home sales data and November homebuilder index coming out after the market opens.
- On the earnings front, we will get results from Lowe’s (LOW) and Tyson Foods (TSN) in the morning, while Agilent (A) will report after the close.
- Zacks ESP or Earnings Surprise Prediction, our proprietary leading indicator of earnings surprises, is showing TSN missing earnings expectations.
Tuesday - 11/20
- We have the October Housing Starts coming out in the morning, with expectations of starts coming in at the 835K level, below September’s 872K level.
- We have Hewlett-Packard (HPQ) and Best Buy (BBY) reporting in the morning, while Salesforce.com (CRM) reports after the close.
- Based on Zacks ESP, CRM is expected to miss earnings expectations.
Wednesday - 11/21
- The weekly Jobless Claims data comes today instead of the usual Thursday because of the Thanksgiving holiday. Last week’s data was distorted by the East Coast storm, and the dust unlikely to settle for another few weeks.
- We also have the University of Michigan sentiment survey for November and the October Leading Indicators coming out today.
- We have Deere & Company (DE) reporting results in the morning. Zacks ESP is indicating that DE will come short of earnings expectations.
Thursday - 11/22
- Thanksgiving Holiday.
Friday - 11/23
- No major earnings or economic reports scheduled.
Here is a list of the 70 companies reporting this holiday-shortened week, including 13 S&P 500 members:
|Company||Ticker||Current Qtr||Year-Ago Qtr||Last EPS Surprise %||Report Day||Time|
|BOB EVANS FARMS||BOBE||0.61||0.51||-3.33||Monday||AMC|
|BROCADE COMM SY||BRCD||0.11||0.05||62.5||Monday||AMC|
|CHINA CORD BLD||CO||0.04||0.05||50||Monday||AMC|
|JACK IN THE BOX||JACK||0.36||0.49||5.71||Monday||AMC|
|LACLEDE GRP INC||LG||-0.16||-0.14||29.03||Monday||BTO|
|NUANCE COMM INC||NUAN||0.34||0.31||10.71||Monday||AMC|
|QIHOO 360 TECH||QIHU||0.06||0.09||-14.29||Monday||AMC|
|TYSON FOODS A||TSN||0.43||0.26||-9.09||Monday||BTO|
|BROWN SHOE CO||BWS||0.47||0.5||433.33||Tuesday||BTO|
|CHICOS FAS INC||CHS||0.22||0.18||6.67||Tuesday||BTO|
|CHINA GREEN AGR||CGA||0.36||0.4||21.05||Tuesday||BTO|
|CHINA XINIYA FS||XNY||0.1||0.19||-14.29||Tuesday||BTO|
|CHIPMOS TEC LTD||IMOS||0.44||0.17||140||Tuesday||BTO|
|CITI TRENDS INC||CTRN||-0.41||-0.38||-22.73||Tuesday||BTO|
|DSW INC CL-A||DSW||0.88||0.88||6.45||Tuesday||BTO|
|HEINZ (:HJ) CO||HNZ||0.88||0.81||3.61||Tuesday||BTO|
|HORMEL FOODS CP||HRL||0.49||0.43||17.07||Tuesday||BTO|
|IEC ELECTRS NEW||IEC||0.21||0.15||15.79||Tuesday||BTO|
|KID BRANDS INC||KID||0.08||0.1||-75||Tuesday||AMC|
|MECOX LANE LTD||MCOX||-0.16||-0.25||-28.57||Tuesday||AMC|
|RAVEN INDS INC||RAVN||0.34||0.31||16.85||Tuesday||BTO|
|SIGNET GRP PLC||SIG||0.37||0.3||1.19||Tuesday||BTO|
|SOC QUIMICA MIN||SQM||0.74||0.54||10.61||Tuesday||AMC|
|TECH DATA CORP||TECD||1.34||1.26||-25.42||Tuesday||BTO|
|TRINA SOLAR LTD||TSL||-0.61||-0.45||-1.09||Tuesday||BTO|
|ZALE CORP NEW||ZLC||-0.68||-1.17||27.38||Tuesday||AMC|
|DEERE & CO||DE||1.87||1.62||-14.29||Wednesday||BTO|
|TSAKOS EGY NAVG||TNP||-0.19||-0.52||44.44||Wednesday||BTO|