U.S. Markets closed
  • S&P 500

    3,768.25
    -27.29 (-0.72%)
     
  • Dow 30

    30,814.26
    -177.24 (-0.57%)
     
  • Nasdaq

    12,998.50
    -114.10 (-0.87%)
     
  • Russell 2000

    2,123.20
    -32.15 (-1.49%)
     
  • Crude Oil

    52.28
    -0.08 (-0.15%)
     
  • Gold

    1,836.80
    +6.90 (+0.38%)
     
  • Silver

    25.23
    +0.36 (+1.46%)
     
  • EUR/USD

    1.2104
    +0.0020 (+0.1694%)
     
  • 10-Yr Bond

    1.0970
    -0.0320 (-2.83%)
     
  • Vix

    24.34
    +1.09 (+4.69%)
     
  • GBP/USD

    1.3606
    +0.0020 (+0.1442%)
     
  • USD/JPY

    104.0000
    +0.3130 (+0.3019%)
     
  • BTC-USD

    36,605.99
    -81.68 (-0.22%)
     
  • CMC Crypto 200

    718.99
    -16.15 (-2.20%)
     
  • FTSE 100

    6,720.65
    -15.06 (-0.22%)
     
  • Nikkei 225

    28,677.24
    +435.03 (+1.54%)
     

Zacks Earnings Trends Highlights: Amazon, Netflix, Intel and J.B. Hunt

Zacks Equity Research
·8 min read

For Immediate Release

Chicago, IL – November 12, 2020 – Zacks Director of Research Sheraz Mian says, “The key takeaway from this earnings season is a steadily improving earnings outlook as reflected in rising earnings estimates."

Handicapping the Improving Earnings Picture

Note: The following is an excerpt from this week’s Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>

Here are the key points:

  • For the 458 S&P 500 members (91.6% of the total) that have reported Q3 results, total earnings are down -8.4% from the same period last year on -1.8% lower revenues, with 84.3% beating EPS estimates and 75.5% beating revenue estimates.

  • This is a notably better performance than what we saw from the same group of 458 companies in the first half of the year, with the EPS and revenue beats percentages tracking significantly higher than other comparable periods.

  • The key takeaway from this earnings season is a steadily improving earnings outlook as reflected in rising earnings estimates.

  • Technology sector results have been notably strong, with total Q3 earnings for the 87.2% of the sector’s market capitalization in the index that have reported up +11.6% from the same period last year on +8.6% higher revenues, with 96.6% beating EPS estimates and 93.1% beating revenue estimates.

  • Conventional retailers are the only group still to report Q3 results at this stage. For the 67.1% of Retail sector market capitalization in the S&P 500 index that has reported results already, total earnings are +15.1% on +12.1% higher revenues, with 90% beating EPS and revenue estimates. The reported earnings and revenue growth rates drop to -15.7% and +2.9% once Amazon AMZN is excluded from the Q3 numbers.

  • Looking at the quarter as a whole, total S&P 500 earnings are expected to decline -8.9% on -1.3% lower revenues. Earnings growth for the quarter drops to -14.1% on an ex-Technology basis, but improves to -4.3% on an ex-Energy basis. The growth picture steadily improved as companies came out with better-than-expected results.

  • Sectors with the weakest Q3 growth outlook remain the social-distancing exposed spaces like Transportation (-116.8% earnings decline), Energy (-98.3%), and Consumer Discretionary (-76.6%).

  • Out of the total 16 Zacks sectors, 9 sectors experienced earnings declines in Q3, with Construction, Medical, Technology, Autos, Retail, Consumer Staples, and Utilities showing earnings growth.

  • For the current period (2020 Q4), total S&P 500 earnings are expected to be down -11.4% on -0.1% lower revenues. Estimates for the quarter are steadily going up, a trend that we saw in Q3 as well, but the pace of improvement has decelerated in recent days.

  • Looking at the calendar-year picture for the S&P 500 index, earnings are expected to decline -17.4% on -4.2% lower revenues in 2020 and increase +21.8% on +7.7% higher revenues in 2021. Estimates for both years have been going up since early July, with full-year 2021 estimates only now going past the 2019 level.

  • The implied ‘EPS’ for the S&P 500 index, calculated using current 2020 P/E of 26.8X and index close, as of November 10th, is $132.28, down from $160.08 in 2019. Using the same methodology, the index ‘EPS’ works out to $161.10 for 2021 (P/E of 22.0X). The multiples for 2020 and 2021 have been calculated using the index’s total market cap and aggregate bottom-up earnings for each year.

  • For the small-cap S&P 600 index, we now have Q3 results from 532 index members or 88.5% of the index’s total membership. Total earnings for these companies are down -7.8% on -5.2% lower revenues, with 77.1% beating EPS estimates and 72.4% beating revenue estimates.

  • Looking at Q3 as a whole for the small-cap index, total earnings are expected to be down -15.4% from the same period last year on -5.4% lower revenues, which would follow a -65.4% decline on -17.8% lower revenues in 2020 Q2.

  • For full-year 2020, the S&P 600 index is expected to experience a -32.8% decline in earnings on -7.3% lower revenues, with easy comps pushing earnings growth to +35.1% in 2021.

The earnings outlook has been steadily improving since early July, as the U.S. economy started coming out of the pandemic-driven slump. While pockets of entrenched weakness remain, the pace and magnitude of the recovery has largely been better than expected.

This improving trend has been showing up in positive estimate revisions, with analysts steadily raising their estimates. We saw this earlier with Q3 estimates and we are seeing the same trend in play for Q4 estimates as well.

It is reasonable to expect this trend of improving earnings estimates to continue as the remaining 42 index members come out with their quarterly results. The worry is that the improving trend will level off or even reverse in the face of surging infection rates that weighs down the economy’s recovery. We saw this unfavorable trend play out in Europe earlier and the worry is that the U.S. economy may be a few weeks behind Europe.

These Covid worries and associated macro uncertainties appear to be making market participants discount better than expected Q3 results, with an above average proportion of companies beating EPS and revenue estimates. That said, companies missing estimates or providing weak guidance did get the appropriate level of punishment, as we saw with Netflix NFLX, Intel INTC, J.B. Hunt JBHT and others.

Looking at Q3 as a whole, combining the results that have come out with estimates for the still-to-come companies, total S&P 500 earnings are expected to decline -8.9% from the year-earlier level on -1.3% lower revenues.

Looking at the outlook on an annual basis, index earnings are expected to decline -18.0% this year, after staying essentially flat last year. Growth is expected to resume next year, with easy comparisons driving most of the growth.

The flow of economic readings continues to be favorable, though the pace of the recovery in the current period will be significantly below Q3’s break-neck speed moderate. The hope is that the recovery in the economy, as well as the earnings outlook doesn’t lose pace in the face of rising infections and delayed fiscal relief.

The Hottest Tech Mega-Trend of All

Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>

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.

 

Media Contact

Zacks Investment Research

800-767-3771 ext. 9339

support@zacks.com

https://www.zacks.com

 

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 https://www.zacks.com/performance for information about the performance numbers displayed in this press release.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
Intel Corporation (INTC) : Free Stock Analysis Report
 
Netflix, Inc. (NFLX) : Free Stock Analysis Report
 
J.B. Hunt Transport Services, Inc. (JBHT) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research