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Note: The following is an excerpt from this week’s Earnings Trends report. You can access the full report that contains detailed historical actuals and estimates for the current and following periods, please click here>>>
With the Retail sector results mostly out, the Q3 earnings season is now effectively behind us. Our overall take on this earnings season has been favorable, with growth finally turning positive and relatively encouraging trends in estimate revisions for the current period. This reassuring view doesn’t fully extend to the Retail sector, whose results have been mixed at best.
For the Retail sector, we now have Q3 results from 91.4% of the sector’s total market capitalization in the S&P 500 index. Total earnings for these retailers are up +7.6% from the same period last year on +5% higher revenues, with 60.6% beating EPS estimates and 42.4% beating revenue estimates.
This is a weaker performance than we have seen from the sector in other recent reporting cycles, particularly with respect to positive surprises. The charts below compare the sector’s Q3 results with what these same retailers reported in other historical periods.
The proportion of positive EPS surprises in Q3 is not only tracking below other historical periods for these same retailers (right-hand chart above), but is also the second lowest of all 16 sectors in the S&P 500. Of the major industries in the Retail sector, only the department stores came out with better than expected results, largely on the back of very tight inventories. This inventory angle was apparent with all the major operators like Macy’s (M - Free Report) , Nordstrom (JWN - Free Report) and others. The picture emerging from all the other major industries like online vendors, restaurants, brick-and-mortar discounters have been mixed.
The Scorecard
We now have Q3 results from 470 S&P 500 members or 94% of the index’s total membership. Total earnings for these 470 index members are up +3.8% from the same period last year on +2.6% higher revenues, with 73.2% beating EPS estimates and 55.3% coming ahead of top-line expectations.
The side-by-side charts below compare the results thus far from the 470 index members with what this same group of index members reported in other recent periods. The left-hand chart compares the earnings and revenue growth rates with historical periods while the right-hand chart is doing the same comparisons for positive EPS and revenue surprises.
Positive surprises were notably tracking above historical periods earlier, but are about in-line with what we have been seeing from this same group of 470 index members in the recent past, as the right-hand chart above shows. The proportion of companies beating both earnings and revenue estimates are modestly tracking above historical periods, as the chart below shows, but not in a big way.
The earnings and revenue growth pace for these 470 index members is still low, but nevertheless an improvement over other recent periods. The growth picture improves notably once the Energy sector’s drag is removed from the data. The Energy sector’s results have come in better than expected, but they are still down in a big way from the year-earlier period, with the sector’s Q3 earnings down -63.3% on -12.9% lower revenues. Excluding the Energy sector, total Q3 earnings would be up +7.2% from the same period last year on +4.2% higher revenues.
The comparison charts below show the growth picture, with and without the Energy sector.
For Q3 as a whole, combining the actual results from the 470 index members with estimates from the still-to-come 30 companies, total earnings are expected to be up +3.5% from the same period last year on +1.5% higher revenues. This is the best growth pace since the first quarter of 2015. The chart below shows the Q3 earnings growth contrasted with declines in the preceding 5 quarters.
Estimates Beyond Q3
The chart below shows Q3 growth expectations contrasted with what was actually achieved in the preceding four quarters and estimates for the following four periods.
Estimates for Q4 have come down, in-line with the trend that we have been seeing for almost three years now. Total Q4 earnings for the S&P 500 index are currently expected to be up +3.2% from the same period last year, which is down from +5.5% in late September.
While Q4 estimates for the Technology and Finance sectors, the two largest in the S&P 500 index, have held up nicely, they have come down for the Retail, Basic Materials, Industrials and Auto sectors in recent days. Earnings for the Retail sector are now expected to be up +0.8% in Q4, which is a drop from the +4.5% growth expected in late September.
Note: Sheraz Mian manages the Zacks equity research department. He is an acknowledged earnings expert whose commentaries and analyses appear on Zacks.com and in the print and electronic media. His weekly earnings related articles include Earnings Trends and Earnings Preview. He manages the Zacks Top 10 and Focus List portfolios and writes the Weekly Market Analysis article for Zacks Premium subscribers.
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Q3 Earnings Season Winding Down
Note: The following is an excerpt from this week’s Earnings Trends report. You can access the full report that contains detailed historical actuals and estimates for the current and following periods, please click here>>>
With the Retail sector results mostly out, the Q3 earnings season is now effectively behind us. Our overall take on this earnings season has been favorable, with growth finally turning positive and relatively encouraging trends in estimate revisions for the current period. This reassuring view doesn’t fully extend to the Retail sector, whose results have been mixed at best.
For the Retail sector, we now have Q3 results from 91.4% of the sector’s total market capitalization in the S&P 500 index. Total earnings for these retailers are up +7.6% from the same period last year on +5% higher revenues, with 60.6% beating EPS estimates and 42.4% beating revenue estimates.
This is a weaker performance than we have seen from the sector in other recent reporting cycles, particularly with respect to positive surprises. The charts below compare the sector’s Q3 results with what these same retailers reported in other historical periods.
The proportion of positive EPS surprises in Q3 is not only tracking below other historical periods for these same retailers (right-hand chart above), but is also the second lowest of all 16 sectors in the S&P 500. Of the major industries in the Retail sector, only the department stores came out with better than expected results, largely on the back of very tight inventories. This inventory angle was apparent with all the major operators like Macy’s (M - Free Report) , Nordstrom (JWN - Free Report) and others. The picture emerging from all the other major industries like online vendors, restaurants, brick-and-mortar discounters have been mixed.
The Scorecard
We now have Q3 results from 470 S&P 500 members or 94% of the index’s total membership. Total earnings for these 470 index members are up +3.8% from the same period last year on +2.6% higher revenues, with 73.2% beating EPS estimates and 55.3% coming ahead of top-line expectations.
The side-by-side charts below compare the results thus far from the 470 index members with what this same group of index members reported in other recent periods. The left-hand chart compares the earnings and revenue growth rates with historical periods while the right-hand chart is doing the same comparisons for positive EPS and revenue surprises.
Positive surprises were notably tracking above historical periods earlier, but are about in-line with what we have been seeing from this same group of 470 index members in the recent past, as the right-hand chart above shows. The proportion of companies beating both earnings and revenue estimates are modestly tracking above historical periods, as the chart below shows, but not in a big way.
The earnings and revenue growth pace for these 470 index members is still low, but nevertheless an improvement over other recent periods. The growth picture improves notably once the Energy sector’s drag is removed from the data. The Energy sector’s results have come in better than expected, but they are still down in a big way from the year-earlier period, with the sector’s Q3 earnings down -63.3% on -12.9% lower revenues. Excluding the Energy sector, total Q3 earnings would be up +7.2% from the same period last year on +4.2% higher revenues.
The comparison charts below show the growth picture, with and without the Energy sector.
For Q3 as a whole, combining the actual results from the 470 index members with estimates from the still-to-come 30 companies, total earnings are expected to be up +3.5% from the same period last year on +1.5% higher revenues. This is the best growth pace since the first quarter of 2015. The chart below shows the Q3 earnings growth contrasted with declines in the preceding 5 quarters.
Estimates Beyond Q3
The chart below shows Q3 growth expectations contrasted with what was actually achieved in the preceding four quarters and estimates for the following four periods.
Estimates for Q4 have come down, in-line with the trend that we have been seeing for almost three years now. Total Q4 earnings for the S&P 500 index are currently expected to be up +3.2% from the same period last year, which is down from +5.5% in late September.
While Q4 estimates for the Technology and Finance sectors, the two largest in the S&P 500 index, have held up nicely, they have come down for the Retail, Basic Materials, Industrials and Auto sectors in recent days. Earnings for the Retail sector are now expected to be up +0.8% in Q4, which is a drop from the +4.5% growth expected in late September.
Note: Sheraz Mian manages the Zacks equity research department. He is an acknowledged earnings expert whose commentaries and analyses appear on Zacks.com and in the print and electronic media. His weekly earnings related articles include Earnings Trends and Earnings Preview. He manages the Zacks Top 10 and Focus List portfolios and writes the Weekly Market Analysis article for Zacks Premium subscribers.