Zacks Earnings Trends Highlights: Brinker International, McDonald's, and Kraft Heinz
For Immediate Release
Chicago, IL – October 28, 2021 – Zacks Director of Research Sheraz Mian says, " For the 192 S&P 500 members that have reported Q3 results through Wednesday, October 27th, total earnings and revenues are up +37.6% and +15.3%, respectively from the same period last year."
A Very Strong and 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 192 S&P 500 members that have reported Q3 results through Wednesday, October 27th, total earnings and revenues are up +37.6% and +15.3%, respectively from the same period last year, with 82.3% beating EPS estimates and 74.0% beating revenue estimates. The proportion of these 192 index members beating both EPS and revenue estimates is 64.1%.
The Q3 earnings and revenue growth rates and the EPS and revenue beats percentages for these 192 index members are below what we saw for the same group of companies in the preceding period, but these metrics are tracking above historical averages.
For the Technology sector, we now have Q3 results from 54.1% of the sector’s market capitalization in the S&P 500 index. Total earnings for these Tech companies are up +31.8% from the same period last year on +16.2% higher revenues, with 87% beating EPS estimates and 56.5% beating revenue estimates.
Looking at Q3 as a whole, total S&P 500 earnings are expected to be up +35.9% from the same period last year on +14.5% higher revenues. This would follow the +95.0% earnings growth on +25.2% higher revenues in Q2.
Rising cost pressures amid supply-chain disruptions and labor/material shortages will keep the spotlight on margins, which are expected to be up year-over-year as well as sequentially in Q3. The margins trajectory over the coming periods is a key source of uncertainty in the earnings outlook given the lack of visibility with respect to the duration of inflationary pressures.
Total S&P 500 earnings for the current period (2021 Q4) are expected to be up +21.1% from the same period last year on +11.0% higher revenues. Importantly, estimates have started going up, though the pace and magnitude of positive revisions are still relatively on the weak side.
Looking at the calendar-year picture for the S&P 500 index, earnings are projected to climb +44.4% on +11.6% higher revenues in 2021 and increase +8.5% on +6.7% higher revenues in 2022. This would follow the -13.0% earnings decline on -1.7% lower revenues in 2020.
For the small-cap S&P 600 index, we now have Q3 results from 130 index members or 21.7% of the index’s total membership. Total earnings for these 130 index members are up +40.7% on +18.5% higher revenues, with 76.9% beating EPS estimates and 65.4% beating revenue estimates.
Looking at Q3 as a whole for the small-cap index, total earnings are expected to be up +46.9% on +16.6% higher revenues, which would follow the +279.4% earnings growth on +34.5% higher revenues in 2021 Q2.
The implied ‘EPS’ for the S&P 500 index, calculated using the current 2021 P/E of 23.3X and index close, as of October 26th, is $195.96, up from $135.68 in 2020. Using the same methodology, the index ‘EPS’ works out to $212.70 for 2022 (P/E of 21.5X) and $233.58 in 2023 (P/E of 19.6X). The multiples have been calculated using the index’s total market cap and aggregate bottom-up earnings for each year.
The market has been focused on the rising cost of inputs and labor and other supply chain issues for the last few months. There was tangible nervousness in the market ahead of the start of the Q3 earnings season that these headwinds will start weighing on corporate profits through compressed margins.
We have seen some of that this earnings season, with companies like Brinker International EAT struggling to effectively deal with higher input and labor costs. But many other companies have been able to pass on higher costs to the end consumer, as we saw with McDonald’s MCD, Kraft Heinz KHC and others.
While these unfavorable cost trends may not have had as much negative impact on earnings as many had feared ahead of the start of the Q3 reporting cycle, they still remain a risk to long earnings trends.
Margin expectations embedded in current consensus earnings and revenue estimates suggest some pressures.
But this is expected to be nothing more than a temporary speed bump.
We remain positive in our earnings outlook, as we see the overall growth picture steadily improving, as the near-term logistical issues get addressed.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $2.4 trillion by 2028 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Recommendations from previous editions of this report have produced gains of +205%, +258% and +477%. The stocks in this report could perform even better.
See these 7 breakthrough stocks now>>
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/performancefor 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
McDonald's Corporation (MCD) : Free Stock Analysis Report
Brinker International, Inc. (EAT) : Free Stock Analysis Report
The Kraft Heinz Company (KHC) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
