Zacks Earnings Trends Highlights: IBM, Intel, Yum Brands and Family Dollar
For Immediate Release
Chicago, IL – October 21, 2013 – Zacks Director of Research Sheraz Mian says, "The picture emerging from the 2013 Q3 earnings season is far from inspiring or reassuring."
The Uninspiring Q3 Earnings Season
The picture emerging from the 2013 Q3 earnings season is far from inspiring or reassuring. There hasn’t been much growth in recent quarters and not much was expected from Q3 either, particularly after the sharp estimate cuts in the run up to the reporting season. But companies are struggling with meeting and exceeding even those lowered expectations.
Total earnings for the 99 S&P 500 companies that have reported results already, as of Friday October 18th, are up +1.0% from the same period last year, with 62.6% beating earnings expectations with a median surprise of +2.1%. Total revenues for these companies are up +2.1%, with 43.4% beating revenue expectations with a median surprise of +0.0%.
All of the growth is coming from the Finance sector. Excluding Finance, total earnings growth for the companies that have reported falls in the negative category – down -6.2%. This is weak performance than what we have seen from the same group of companies in Q2 and the 4-quarter average.
Expectations for the four-fifths of the S&P 500 members still to report Q3 results remain low, which should effectively guarantee that most companies will have little difficulty in beating them. We see this quarter after quarter, with about two-thirds of the companies beating earnings expectations – a good illustration of management teams’ tendency to under-promise and over-deliver. However, beat ratios are running a tad bit lower thus far in Q3.
But unlike the low growth expectations for Q3, consensus estimates for Q4 and beyond represent a material acceleration in the growth pace.
Total earnings growth is expected to ramp up to +9.5% in Q4 from the roughly +3.1% growth pace in the first half of the year and the current expected +0.2% growth in Q3. The actual growth in Q3 will likely be more in the vicinity of what was achieved in the first half of the year, i.e. in the +2.5% to +3% range.
Guidance has overwhelmingly been negative over the last few quarters. But if current Q4 expectations have to hold, then we will need to see a change on the guidance front; we need to see more companies either guide higher or reaffirm current consensus expectations. The overall tone of guidance thus far in Q3 isn’t materially different from what we have been seeing in the last few quarters, as the negative guidance from IBM (IBM-Free Report), Intel (INTC-Free Report), Yum Brands (YUM-Free Report), Family Dollar (FDO-Free Report) and many others shows. We will know more in the next three weeks, but Q4 estimates remain at risk of significant revisions in the absence of reassuring company guidance.
The market hasn’t cared much in the recent past about negative revisions as aggregate earnings estimates have been coming down for over a year now. But if we are entering a post-QE world, as I believe we are, then it will likely be difficult to overlook negative earnings estimate revisions going forward. How the market responds to negative guidance and the resulting negative revisions will tell us a lot about what to expect going forward.
Want stock picks from Zacks Equity Research that are based on earnings estimates? Subscribe to the free "Profit from the Pros" newsletter: Click here
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Click here to subscribe to this free newsletter today.
About Zacks
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros.
Get the full Report on INTC - FREE
Get the full Report on YUM - FREE
Get the full Report on IBM - FREE
Get the full Report on FDO - FREE
Follow us on Twitter: http://twitter.com/zacksresearch
Join us on Facebook: http://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
http://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 http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Read the analyst report on IBM
Read the analyst report on INTC
Read the analyst report on YUM
Read the analyst report on FDO
Zacks Investment Research
