<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="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>>>” data-reactid=”11″>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>>>
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Here are the key points:” data-reactid=”12″>Here are the key points:
- The growth picture is not expected to improve in the June quarter, which would follow the roughly flat finish in Q1. Driving this growth challenge is tough comparisons, with tax cuts boosting the year-earlier periods.
- Total Q2 earnings for the S&P 500 index are expected to be down -3.1% from the year-earlier period on +4.3% higher revenues. This would follow the +0.2% earnings growth in Q1 on +5.2% higher revenues.
- Estimates for Q2 have come down, but the magnitude of negative revisions remains below the comparable periods of other recent quarters. The -3.1% decline currently expected is down from flat growth in late-March.
- Q2 earnings growth is expected to be negative for 9 of the 16 Zacks sectors, with Technology, Basic Materials, Construction and Conglomerates as double-digit decliners.
- Recent earnings releases have been from the Retail sector, whose Q1 earnings performance has been mixed relative to other recent periods. Total Q1 earnings and revenues for the sector are up +12.2% and +7.9% respectively, with 73.7% beating EPS estimates and 52.6% beating revenue estimates.
- For the S&P 500 index as a whole, Q1 earnings remained below the year-earlier level for 5 of the 16 Zacks sectors, with Energy (-22.4% decline), Basic Materials (-11.5%) and Technology (-7.2%) as the biggest drags. Excluding the Energy sector, Q1 earnings growth would be +1.3%.
- For the small-cap S&P 600 index, total Q1 earnings were -17.8% below the year-earlier level on +5.5% higher revenues (a dozen or so reports are still to come).
- For full-year 2019, total earnings for the S&P 500 index are expected to be up +1.8% on +3.3% higher revenues, which would follow the +23.1% earnings growth on +9.1% higher revenues in 2018. Double-digit growth is expected to resume in 2020, with earnings expected to be up +10.9% that year.
- The implied ‘EPS’ for the index, calculated using current 2019 P/E of 17.6X and index close, as of June 11th, is $163.81. Using the same methodology, the index ‘EPS’ works out to $181.59 for 2020 (P/E of 15.9X). The multiples for 2019 and 2020 have been calculated using the index’s total market cap and aggregate bottom-up earnings for each year.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Q1 Earnings Season Scorecard for the Retail Sector” data-reactid=”40″>Q1 Earnings Season Scorecard for the Retail Sector
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="We now have Q1 results from 38 of the 39 retailers in the S&P 500 companies. Total earnings for these 38 retailers are up +12.2% from the same period last year on +7.9% higher revenues, with 73.7% beating EPS estimates and 52.6% beating revenue estimates. The comparison charts below put these results in a historical context.” data-reactid=”41″>We now have Q1 results from 38 of the 39 retailers in the S&P 500 companies. Total earnings for these 38 retailers are up +12.2% from the same period last year on +7.9% higher revenues, with 73.7% beating EPS estimates and 52.6% beating revenue estimates. The comparison charts below put these results in a historical context.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="The comparisons charts above provide a mixed picture, with EPS beats tracking above or about in-line with historical periods while revenue beats are tracking below what we had seen from the same group of retailers in the past. Given how low expectations had been ahead of the start of this earnings season, this is a fairly weak showing from the traditional operators.” data-reactid=”52″>The comparisons charts above provide a mixed picture, with EPS beats tracking above or about in-line with historical periods while revenue beats are tracking below what we had seen from the same group of retailers in the past. Given how low expectations had been ahead of the start of this earnings season, this is a fairly weak showing from the traditional operators.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="With respect to growth, earnings growth is tracking below what we had seen from the same group of 38 retailers in the past, but revenue growth is tracking either better or in-line with historical periods. ” data-reactid=”53″>With respect to growth, earnings growth is tracking below what we had seen from the same group of 38 retailers in the past, but revenue growth is tracking either better or in-line with historical periods.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Please note that the Zacks Retail sector also includes the online vendors like Amazon (AMZN) and restaurant operators like McDonalds (MCD), in addition to the traditional brick-and-mortar operators. A big part of the reported results from the 38 retailers are comprised of such online vendors or restaurant operators.” data-reactid=”54″>Please note that the Zacks Retail sector also includes the online vendors like Amazon (AMZN) and restaurant operators like McDonalds (MCD), in addition to the traditional brick-and-mortar operators. A big part of the reported results from the 38 retailers are comprised of such online vendors or restaurant operators.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Amazon’s +118.6% higher earnings on +17% higher revenues in Q1 is having an outsized bearing on the sector’s growth picture. The comparisons charts below show the reported growth picture with and without the Amazon numbers.” data-reactid=”55″>Amazon’s +118.6% higher earnings on +17% higher revenues in Q1 is having an outsized bearing on the sector’s growth picture. The comparisons charts below show the reported growth picture with and without the Amazon numbers.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Looking Beyond Q1 – The Big Picture” data-reactid=”66″>Looking Beyond Q1 – The Big Picture
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="The chart below of quarterly year-over-year earnings and revenue growth for the S&P 500 index shows estimates for the current and following four quarters and actual results for the preceding four quarters.” data-reactid=”67″>The chart below of quarterly year-over-year earnings and revenue growth for the S&P 500 index shows estimates for the current and following four quarters and actual results for the preceding four quarters.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="As you can see above, earnings growth is expected to be negative in Q2 and Q3, with +5% growth currently expected in the last quarter of the year. This would follow the essentially flat showing in the first quarter of the year.” data-reactid=”82″>As you can see above, earnings growth is expected to be negative in Q2 and Q3, with +5% growth currently expected in the last quarter of the year. This would follow the essentially flat showing in the first quarter of the year.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Driving this tough growth picture is tough comparisons due to the huge boost to profitability in the year-earlier period. The chart below puts earnings growth expectations for full-year 2019 in the context of where growth has been in recent years and what is expected in the next two years.” data-reactid=”83″>Driving this tough growth picture is tough comparisons due to the huge boost to profitability in the year-earlier period. The chart below puts earnings growth expectations for full-year 2019 in the context of where growth has been in recent years and what is expected in the next two years.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="The market appears to have accepted the deceleration in growth this year in the hope that growth resumes from next year onwards. It is in the context of these lowered expectations that market participants found actual Q1 results and the modest estimate cuts to Q2 estimates as reassuring.” data-reactid=”94″>The market appears to have accepted the deceleration in growth this year in the hope that growth resumes from next year onwards. It is in the context of these lowered expectations that market participants found actual Q1 results and the modest estimate cuts to Q2 estimates as reassuring.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="The key issue will be if expectations for the second half of the year and beyond hold or come down as we move through the remainder of the year. Analysts have not made any significant downward adjustments to their estimates in response to the ongoing trade dispute, likely in the hope that the issue will eventually get resolved. That said, the trade uncertainty has been a major negative for overall market sentiment.” data-reactid=”95″>The key issue will be if expectations for the second half of the year and beyond hold or come down as we move through the remainder of the year. Analysts have not made any significant downward adjustments to their estimates in response to the ongoing trade dispute, likely in the hope that the issue will eventually get resolved. That said, the trade uncertainty has been a major negative for overall market sentiment.
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McDonald’s Corporation (MCD) : Free Stock Analysis Report
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research” data-reactid=”97″>
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McDonald’s Corporation (MCD) : Free Stock Analysis Report
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
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