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The big banks have given us a reassuring start to the Q3 reporting cycle. If this trend continues next week when a broad and representative cross section of corporate America is on deck to come out with quarterly results, then we will have a tangible reason to get optimistic about the overall earnings picture.
J.P. Morgan (JPM - Free Report) stayed true to its well-earned reputation for operational excellence, with solid gains in both consumer banking as well as in its capital markets platform. In consumer banking, the core loan portfolio was up a robust +15% from the same period last year on essentially flat net-interest margin. On the investment banking side, J.P. Morgan came out with momentum in both capital markets as well as on the advisory side.
On the markets side, J.P. Morgan’s trading volumes benefited from the post-Brexit surge, which management indicated has continued into Q4 as well. Overall markets revenue was up more than +20%, largely reflecting momentum in fixed income, currencies and commodities. We saw this positive capital markets trend in the Citigroup (C - Free Report) report as well, which has favorable read-throughs for the Goldman Sachs (GS - Free Report) report on Tuesday and Bank of America (BAC - Free Report) report on Monday. The Wells Fargo (WFC - Free Report) report was solid as well, but the issue with them is more about political scrutiny, negative headlines and potential litigation and not earnings, at least no at this stage.
It will be interesting if this positive start from the major banks will continue with the other banks who are reporting this week. Bank earnings continue to be shackled by low interest rates, which have been weighing on the group’s margins. The interest rates question is of course very complicated, as it not only reflects the market’s evolving Fed view, but also the widespread incidence of negative yields in many other developed markets. Current consensus expectations for the group for the coming quarters and beyond reflect a notable improvement in this situation, particularly with respect to margins, as the chart below of annual Finance sector margins, shows.
This week’s reporting docket isn’t just about banks and the broader Finance sector, we have more than 240 companies reporting results this week, including 80 S&P 500 members from a cross section of all major sectors. We will have a pretty good sense of how the Q3 earnings season is unfolding by the end of this week.
Q3 Earnings Season Scorecard (as of 10/14/2016)
Including the bank earnings reports, we now have Q3 results from 34 S&P 500 members. Total earnings for these 34 S&P 500 members are up +1.3% from the same period last year on +2.9% higher revenues, with 79.4% beating EPS estimates and 64.7% coming ahead of revenue estimates. The table below shows the scorecard of these 34 index members.
This is better performance than we have seen from the same group of 34 index members in other recent periods, as the comparison charts below show.
The picture emerging from the above comparison chart would be in-line with our modestly favorable commentary on the Q2 earnings season when we were detecting an ever-so-slight improvement in the growth picture. Earnings growth was in negative territory in Q2 – the 5th quarter in a row of earnings declines for the index – but the pace of declines was nevertheless an improvement over what we had seen in the preceding two quarters. This gave rise to the narrative that the worst was likely behind us now on the growth front and that the picture will steadily be improving going forward.
For the Finance sector, we have Q3 results from only 5 sector members. But these 5 combined account for more than a fifth of the sector’s total market cap in the index. Total earnings for these 5 sector companies (includes J.P. Morgan, Citigroup & Wells Fargo) are up +1.3% from the same period last year on +2.9% higher revenues, with all of them beating EPS and revenue expectations (100% beat %).
This is better performance than we have seen from these banks in a while, as the below comparison charts show.
Q3 Expectations As a Whole
The strong results from the major banks has helped improve the overall Q3 growth expectations, with total Q3 earnings for the S&P 500 index now expected to be down -2.2% from the same period last year on +1.5% higher revenues. This would compare to 2016 Q2 earnings growth of -2.8% on +0.2% higher revenues.
The table below shows the summary picture for Q3 earnings, revenues and margins contrasted with the corresponding results from the previous quarter.
As you can see, Energy still remains the biggest drag on the aggregate growth picture, with Autos and Transportation as the other major growth laggards. Tough comparisons at Ford (F - Free Report) and the air carriers, particularly United (UAL - Free Report) and American (AAL - Free Report) , explain the growth issues in those two sectors.
For the two biggest sectors, Technology earnings are expected to be down -1.7% on -1.1% lower revenues while Finance earnings are expected to be up +8.5% on +1.4% higher revenues. The Tech decline is solely a function of Apple (AAPL - Free Report) , which is expected to see earnings decline -20.6% from the same period last year on -9.6% lower revenues. Excluding the Apple drag, the Tech sector’s earnings would be up +3.0%.
Expectations Beyond Q3
The chart below shows current bottom-up consensus earnings expectations for the index in 2016 Q3 and the following four quarters contrasted with actual results in the preceding four quarters. Please note that the columns represent bottom-up earnings totals for each quarter in billions of dollars while the line represents the quarterly growth rates. As you can see, positive growth is expected to resume from Q4 (+5.2%), with the growth pace expected to ramp up meaningfully in the following quarters.
The Energy sector drag is expected to end in 2016 Q4 and beyond, as the chart below of the sector’s earnings shows.
The improved Energy sector outlook makes sense, given shifting comparisons and the recent momentum in oil prices. But we will have to wait to find out if estimates for the other sectors will hold up as companies report Q3 results and provide guidance for Q4 and beyond.
It will be interesting to see if the decelerated pace of negative revisions that we saw the last earnings season will get repeated this time as well.
Note: Sheraz Mian regularly provides earnings analysis on Zacks.com and appears frequently in the print and electronic media. In addition to this Earnings Preview article, he publishes the Zacks Earnings Trends report every week.
If you want an email notification each time Sheraz publishes a new article, pleaseclick here>>>
Here is a list of the 244 companies reporting this week, including 80 S&P 500 member.
Company
Ticker
Current Qtr
Year-Ago Qtr
Last EPS Surprise %
Report Day
Time
BANK OF AMER CP
BAC
0.34
0.37
5.88%
Monday
BTO
HASBRO INC
HAS
1.74
1.58
5.13%
Monday
BTO
HUNT (JB) TRANS
JBHT
1.02
0.99
-4.17%
Monday
BTO
LENNOX INTL INC
LII
2.26
1.82
7.66%
Monday
BTO
AMERIS BANCORP
ABCB
0.59
0.48
9.62%
Monday
BTO
NETFLIX INC
NFLX
0.06
0.07
350.00%
Monday
AMC
UNITED CONT HLD
UAL
3.05
4.53
1.56%
Monday
AMC
INTL BUS MACH
IBM
3.21
3.34
2.08%
Monday
AMC
DEL TACO RSTRNT
TACO
0.12
-0.06
8.33%
Monday
AMC
EQUITY LIFESTYL
ELS
0.83
0.77
1.35%
Monday
AMC
GIGPEAK INC
GIG
0.01
0.04
50.00%
Monday
AMC
CELANESE CP-A
CE
1.61
1.5
2.58%
Monday
AMC
WINTRUST FINL
WTFC
0.9
0.75
4.65%
Monday
AMC
CENTERSTATE BNK
CSFL
0.3
0.22
18.52%
Monday
AMC
FIRST DEFIANCE
FDEF
0.8
0.72
12.68%
Monday
AMC
SERVISFIRST BCS
SFBS
0.72
0.61
5.97%
Monday
AMC
IDEX CORP
IEX
0.92
0.89
6.45%
Monday
AMC
SCHWAB(CHAS)
SCHW
0.33
0.27
0.00%
Tuesday
BTO
UNITEDHEALTH GP
UNH
2.08
1.65
3.70%
Tuesday
BTO
BLACKROCK INC
BLK
5.04
5
-0.21%
Tuesday
BTO
PHILIP MORRIS
PM
1.23
1.24
-4.96%
Tuesday
BTO
OMNICOM GRP
OMC
1.03
0.97
1.49%
Tuesday
BTO
REGIONS FINL CP
RF
0.21
0.19
0.00%
Tuesday
BTO
JOHNSON & JOHNS
JNJ
1.65
1.49
4.19%
Tuesday
BTO
COMERICA INC
CMA
0.79
0.74
13.24%
Tuesday
BTO
GRAINGER W W
GWW
3.02
3.03
-8.83%
Tuesday
BTO
KANSAS CITY SOU
KSU
1.2
1.21
17.31%
Tuesday
BTO
GOLDMAN SACHS
GS
3.86
2.9
23.59%
Tuesday
BTO
HARLEY-DAVIDSON
HOG
0.63
0.69
1.31%
Tuesday
BTO
BADGER METER
BMI
0.33
0.29
-2.99%
Tuesday
BTO
SYNOVUS FINL CP
SNV
0.5
0.42
4.26%
Tuesday
BTO
DOMINOS PIZZA
DPZ
0.9
0.67
5.38%
Tuesday
BTO
WOLVERINE WORLD
WWW
0.48
0.48
13.64%
Tuesday
BTO
HANMI FINL CP
HAFC
0.44
0.44
4.76%
Tuesday
BTO
MGIC INVSTMT CP
MTG
0.17
0.29
30.00%
Tuesday
BTO
TILE SHOP HLDGS
TTS
0.09
0.08
7.69%
Tuesday
BTO
CONS PORTFOLIO
CPSS
0.22
0.28
8.70%
Tuesday
BTO
MERCANTILE BANK
MBWM
0.44
0.45
12.20%
Tuesday
BTO
STEPAN CO
SCL
0.94
0.92
11.97%
Tuesday
BTO
INTEL CORP
INTC
0.73
0.64
11.32%
Tuesday
AMC
LINEAR TEC CORP
LLTC
0.54
0.46
1.89%
Tuesday
AMC
INTUITIVE SURG
ISRG
4.35
4.5
15.44%
Tuesday
AMC
NAVIENT CORP
NAVI
0.47
0.47
4.44%
Tuesday
AMC
LEGACY TX FINL
LTXB
0.51
0.38
11.11%
Tuesday
AMC
HANCOCK HLDG CO
HBHC
0.58
0.52
34.09%
Tuesday
AMC
UTD COMM FIN CP
UCFC
0.11
0.09
10.00%
Tuesday
AMC
HAWAIIAN HLDGS
HA
1.82
1.29
6.14%
Tuesday
AMC
HOPE BANCORP
HOPE
0.32
0.32
-3.23%
Tuesday
AMC
PINNACLE FIN PT
PNFP
0.79
0.66
1.35%
Tuesday
AMC
INTERACTIVE BRK
IBKR
0.32
0.35
14.29%
Tuesday
AMC
SOUTHWEST BC-OK
OKSB
0.27
0.22
16.67%
Tuesday
AMC
ADTRAN INC
ADTN
0.2
0.16
15.79%
Tuesday
AMC
FRANKLIN FNL NW
FSB
0.66
0.46
10.71%
Tuesday
AMC
MANHATTAN ASOC
MANH
0.43
0.38
12.20%
Tuesday
AMC
PZENA INVESTMNT
PZN
0.1
0.12
9.09%
Tuesday
AMC
UNIVL FST PRODS
UFPI
1.46
1.26
13.89%
Tuesday
AMC
FIRST MIDWST BK
FMBI
0.32
0.3
6.67%
Tuesday
AMC
FULTON FINL
FULT
0.23
0.2
4.55%
Tuesday
AMC
RENASANT CORP
RNST
0.57
0.53
3.51%
Tuesday
AMC
CREE INC
CREE
0.03
0.12
-14.29%
Tuesday
AMC
SEAGATE TECH
STX
0.89
0.54
15.00%
Wednesday
BTO
NORTHERN TRUST
NTRS
1.08
0.96
0.95%
Wednesday
BTO
AMPHENOL CORP-A
APH
0.68
0.65
3.17%
Wednesday
BTO
HALLIBURTON CO
HAL
-0.06
0.31
26.32%
Wednesday
BTO
BB&T CORP
BBT
0.7
0.64
9.23%
Wednesday
BTO
M&T BANK CORP
MTB
2.04
1.93
-0.48%
Wednesday
BTO
MORGAN STANLEY
MS
0.64
0.34
25.00%
Wednesday
BTO
GENUINE PARTS
GPC
1.29
1.24
-1.54%
Wednesday
BTO
ST JUDE MEDICAL
STJ
1.01
0.97
0.00%
Wednesday
BTO
US BANCORP
USB
0.84
0.81
2.47%
Wednesday
BTO
ABBOTT LABS
ABT
0.58
0.54
3.77%
Wednesday
BTO
REYNOLDS AMER
RAI
0.65
0.55
-4.92%
Wednesday
BTO
DOVER CORP
DOV
0.82
1.14
1.16%
Wednesday
BTO
TUPPERWARE BRND
TUP
0.8
0.79
4.50%
Wednesday
BTO
CDN PAC RLWY
CP
2.12
2.06
1.92%
Wednesday
BTO
UNIFIRST CORP
UNF
1.23
1.43
8.76%
Wednesday
BTO
ASML HOLDING NV
ASML
1.07
0.83
6.90%
Wednesday
BTO
PAC PREMIER BCP
PPBI
0.42
0.38
-9.52%
Wednesday
BTO
AKZO NOBEL NV
AKZOY
N/A
0.46
Wednesday
BTO
SUPERVALU INC
SVU
0.1
0.13
-9.52%
Wednesday
BTO
NATUS MEDICAL
BABY
0.36
0.39
8.33%
Wednesday
BTO
MATTEL INC
MAT
0.7
0.71
66.67%
Wednesday
AMC
EBAY INC
EBAY
0.36
0.35
0.00%
Wednesday
AMC
XILINX INC
XLNX
0.54
0.48
10.91%
Wednesday
AMC
FMC TECH INC
FTI
0.23
0.61
-26.67%
Wednesday
AMC
AMER EXPRESS CO
AXP
0.96
1.24
9.37%
Wednesday
AMC
SL GREEN REALTY
SLG
1.52
1.71
7.23%
Wednesday
AMC
UTD RENTALS INC
URI
2.45
2.57
11.96%
Wednesday
AMC
CITRIX SYS INC
CTXS
0.97
0.87
7.61%
Wednesday
AMC
LAM RESEARCH
LRCX
1.77
1.82
9.76%
Wednesday
AMC
TRACTOR SUPPLY
TSCO
0.66
0.64
0.00%
Wednesday
AMC
EASTGROUP PPTYS
EGP
1.04
0.94
0.00%
Wednesday
AMC
PACKAGING CORP
PKG
1.31
1.26
5.93%
Wednesday
AMC
HELIX EGY SOLUT
HLX
0.04
0.09
23.08%
Wednesday
AMC
CVB FINL
CVBF
0.24
0.26
-8.00%
Wednesday
AMC
SIMMONS FIRST A
SFNC
0.85
0.85
1.23%
Wednesday
AMC
BJ'S RESTAURANT
BJRI
0.33
0.39
-1.75%
Wednesday
AMC
LASALLE HTL PRP
LHO
0.87
0.87
-1.04%
Wednesday
AMC
EAST WEST BC
EWBC
0.69
0.65
2.90%
Wednesday
AMC
BRANDYWINE RT
BDN
0.33
0.43
3.23%
Wednesday
AMC
SELECT COMFORT
SCSS
0.57
0.62
200.00%
Wednesday
AMC
HEXCEL CORP
HXL
0.61
0.55
9.37%
Wednesday
AMC
STEEL DYNAMICS
STLD
0.65
0.25
3.57%
Wednesday
AMC
UMPQUA HLDGS CP
UMPQ
0.31
0.28
6.90%
Wednesday
AMC
FNB CORP
FNB
0.24
0.22
-4.35%
Wednesday
AMC
HERITAGE-CRYSTL
HCCI
0.13
0.12
166.67%
Wednesday
AMC
TRUEBLUE INC
TBI
0.75
0.54
18.60%
Wednesday
AMC
PREFERRED BANK
PFBC
0.63
0.57
3.39%
Wednesday
AMC
VALMONT INDS
VMI
1.5
1.39
6.32%
Wednesday
AMC
EXPONENT INC
EXPO
0.33
0.43
-11.63%
Wednesday
AMC
SLM CORP
SLM
0.11
0.1
9.09%
Wednesday
AMC
WD 40 CO
WDFC
0.82
0.8
2.33%
Wednesday
AMC
CATHAY GENL BCP
CATY
0.6
0.47
2.33%
Wednesday
AMC
COHEN&STRS INC
CNS
0.51
0.37
-8.00%
Wednesday
AMC
EAGLE BCP INC
EGBN
0.69
0.63
5.97%
Wednesday
AMC
FIRST CT BANCRP
FBNK
0.25
0.25
-4.35%
Wednesday
AMC
GREAT SOUTH BCP
GSBC
0.81
0.79
11.25%
Wednesday
AMC
RLI CORP
RLI
0.61
0.7
-3.17%
Wednesday
AMC
TRISTATE CP HLD
TSC
0.23
0.22
9.09%
Wednesday
AMC
BANCO LATINOAME
BLX
0.78
0.86
-21.33%
Wednesday
AMC
CAROLINA FIN CP
CARO
0.37
0.4
13.89%
Wednesday
AMC
NVE CORP
NVEC
0.56
0.68
20.37%
Wednesday
AMC
LANDSTAR SYSTEM
LSTR
0.81
0.9
-7.32%
Wednesday
AMC
CROWN HLDGS INC
CCK
1.3
1.34
8.18%
Wednesday
AMC
GRACO INC
GGG
0.88
0.86
-10.10%
Wednesday
AMC
CORE LABS NV
CLB
0.39
0.83
0.00%
Wednesday
AMC
KAISER ALUMINUM
KALU
1.23
1.07
-27.66%
Wednesday
AMC
BANCORPSOUTH
BXS
0.4
0.36
0.00%
Wednesday
AMC
HNI CORP
HNI
0.77
0.93
11.48%
Wednesday
AMC
UNION PAC CORP
UNP
1.39
1.5
0.00%
Thursday
BTO
FIFTH THIRD BK
FITB
0.41
0.45
8.11%
Thursday
BTO
BANK OF NY MELL
BK
0.81
0.74
1.33%
Thursday
BTO
QUEST DIAGNOSTC
DGX
1.35
1.28
2.29%
Thursday
BTO
PROLOGIS INC
PLD
0.7
0.58
1.69%
Thursday
BTO
VERIZON COMM
VZ
0.99
1.04
1.08%
Thursday
BTO
WALGREENS BAI
WBA
0.99
0.88
3.51%
Thursday
BTO
DANAHER CORP
DHR
0.82
1.05
14.68%
Thursday
BTO
TRAVELERS COS
TRV
2.29
2.93
3.77%
Thursday
BTO
AMER AIRLINES
AAL
1.66
2.77
7.27%
Thursday
BTO
ALASKA AIR GRP
ALK
2.04
2.16
1.92%
Thursday
BTO
PULTE GROUP ONC
PHM
0.43
0.33
12.12%
Thursday
BTO
NUCOR CORP
NUE
0.9
0.71
4.29%
Thursday
BTO
TEXTRON INC
TXT
0.66
0.63
4.76%
Thursday
BTO
ILL TOOL WORKS
ITW
1.49
1.39
4.29%
Thursday
BTO
PPG INDS INC
PPG
1.56
1.61
0.54%
Thursday
BTO
ALLIANCE DATA
ADS
4.17
3.73
-1.20%
Thursday
BTO
SNAP-ON INC
SNA
2.15
1.98
6.31%
Thursday
BTO
ICON PLC
ICLR
1.18
1.02
0.88%
Thursday
BTO
GENTEX CORP
GNTX
0.3
0.27
3.45%
Thursday
BTO
DANA INC
DAN
0.43
0.41
12.77%
Thursday
BTO
LITHIA MOTORS
LAD
2.16
2.03
0.51%
Thursday
BTO
DUNKIN BRANDS
DNKN
0.58
0.52
1.79%
Thursday
BTO
WABCO HOLDINGS
WBC
1.47
1.39
2.14%
Thursday
BTO
BANC OF CA INC
BANC
0.42
0.29
4.88%
Thursday
BTO
FIRST AMER FINL
FAF
0.86
0.71
13.58%
Thursday
BTO
GATX CORP
GATX
1.33
1.52
20.16%
Thursday
BTO
POOL CORP
POOL
0.99
0.9
3.66%
Thursday
BTO
DST SYSTEMS
DST
1.48
1.49
13.60%
Thursday
BTO
HOME BANCSHARES
HOMB
0.31
0.26
3.33%
Thursday
BTO
LAWSON PRODUCTS
LAWS
0.06
0.27
-88.24%
Thursday
BTO
MONRO MUFFLER
MNRO
0.56
0.57
2.04%
Thursday
BTO
S&T BANCORP INC
STBA
0.5
0.54
-2.00%
Thursday
BTO
SUNCOKE ENERGY
SXCP
0.31
0.43
-46.51%
Thursday
BTO
ULTRATECH STEP
UTEK
0.17
-0.17
44.44%
Thursday
BTO
WNS HLDGS-ADR
WNS
0.37
0.41
-2.78%
Thursday
BTO
ROGERS COMM CLB
RCI
0.67
0.69
-3.12%
Thursday
BTO
SUPERCOM LTD
SPCB
0
0.05
0.00%
Thursday
BTO
STEWART INFO SV
STC
0.97
0.94
-43.02%
Thursday
BTO
SUNCOKE ENERGY
SXC
-0.09
-0.06
-400.00%
Thursday
BTO
UNION BANKSHARS
UBSH
0.44
0.4
7.32%
Thursday
BTO
BENCHMARK ELETR
BHE
0.36
0.41
-6.06%
Thursday
BTO
DNB FINANCIAL
DNBF
0.39
0.45
14.63%
Thursday
BTO
COMSTOCK MINING
LODE
-0.02
-0.07
0.00%
Thursday
BTO
MCCLATCHY CO-A
MNI
-0.69
0.4
-250.00%
Thursday
BTO
NEUROMETRIX INC
NURO
-0.82
-1.04
-477.42%
Thursday
BTO
UNITIL CORP
UTL
0.14
0.12
38.46%
Thursday
BTO
RELIANCE STEEL
RS
1.31
1.16
3.82%
Thursday
BTO
SONOCO PRODUCTS
SON
0.68
0.65
7.35%
Thursday
BTO
BANKUNITED INC
BKU
0.53
0.5
1.96%
Thursday
BTO
IMAX CORP
IMAX
0.03
0.12
-10.00%
Thursday
BTO
GROUP 1 AUTO
GPI
2.08
1.91
2.86%
Thursday
BTO
KCG HOLDINGS
KCG
0.1
0.48
11.76%
Thursday
BTO
CAPITAL BNK FIN
CBF
0.43
0.33
10.53%
Thursday
BTO
JAKKS PACIFIC
JAKK
1.15
1.12
10.00%
Thursday
BTO
NORTHWESTERN CP
NWE
0.59
0.51
16.07%
Thursday
BTO
CROWN CASTLE
CCI
1.13
1.07
5.45%
Thursday
AMC
KLA-TENCOR CORP
KLAC
1.06
0.71
23.78%
Thursday
AMC
MICROSOFT CORP
MSFT
0.68
0.67
18.97%
Thursday
AMC
SCHLUMBERGER LT
SLB
0.23
0.78
4.55%
Thursday
AMC
SOUTHWESTRN ENE
SWN
0.07
0.01
18.18%
Thursday
AMC
E TRADE FINL CP
ETFC
0.38
0.33
23.08%
Thursday
AMC
PEOPLES UTD FIN
PBCT
0.23
0.23
4.55%
Thursday
AMC
PAYPAL HOLDINGS
PYPL
0.27
0.26
0.00%
Thursday
AMC
ADV MICRO DEV
AMD
-0.01
-0.19
36.36%
Thursday
AMC
BOSTON PRIV FIN
BPFH
0.2
0.14
5.26%
Thursday
AMC
FIRST FIN BC-OH
FFBC
0.36
0.3
5.88%
Thursday
AMC
SVB FINL GP
SIVB
1.75
1.57
5.33%
Thursday
AMC
TEXAS CAP BCSHS
TCBI
0.86
0.75
2.63%
Thursday
AMC
ASSOC BANC CORP
ASB
0.32
0.31
3.33%
Thursday
AMC
BROWN & BROWN
BRO
0.49
0.47
11.36%
Thursday
AMC
ATHENAHEALTH IN
ATHN
0.21
0.11
-62.50%
Thursday
AMC
MB FINANCL INC
MBFI
0.6
0.51
3.57%
Thursday
AMC
GLACIER BANCORP
GBCI
0.42
0.39
-2.44%
Thursday
AMC
PROOFPOINT INC
PFPT
-0.41
-0.47
36.07%
Thursday
AMC
FCB FINL HLDGS
FCB
0.58
0.48
1.82%
Thursday
AMC
AMER RIVER BSH
AMRB
0.2
0.2
-5.00%
Thursday
AMC
COBIZ FINL INC
COBZ
0.2
0.17
16.67%
Thursday
AMC
CLEARWATER PAPR
CLW
0.15
1.35
5.13%
Thursday
AMC
INDEP BK MASS
INDB
0.75
0.71
2.63%
Thursday
AMC
NATIONAL BK HLD
NBHC
0.25
0.17
-28.57%
Thursday
AMC
MAXIM INTG PDTS
MXIM
0.47
0.42
2.08%
Thursday
AMC
WERNER ENTRPRS
WERN
0.26
0.44
8.70%
Thursday
AMC
BOSTON BEER INC
SAM
2.54
2.85
4.57%
Thursday
AMC
SEI INVESTMENTS
SEIC
0.49
0.47
-2.00%
Thursday
AMC
KNOLL INC
KNL
0.4
0.38
2.33%
Thursday
AMC
FORWARD AIR CRP
FWRD
0.51
0.58
-1.72%
Thursday
AMC
SKECHERS USA-A
SKX
0.46
0.58
-5.88%
Thursday
AMC
SANDY SPRING
SASR
0.49
0.45
-2.22%
Thursday
N/A
ACTELION LTD
ALIOF
2.12
1.9
18.01%
Thursday
N/A
PARKER HANNIFIN
PH
1.57
1.52
7.34%
Friday
BTO
MOODYS CORP
MCO
1.18
1.11
4.00%
Friday
BTO
MCDONALDS CORP
MCD
1.48
1.4
5.07%
Friday
BTO
SUNTRUST BKS
STI
0.89
1
2.30%
Friday
BTO
CITIZENS FIN GP
CFG
0.5
0.4
6.98%
Friday
BTO
HONEYWELL INTL
HON
1.63
1.57
1.22%
Friday
BTO
GENL ELECTRIC
GE
0.31
0.32
10.87%
Friday
BTO
SYNCHRONY FIN
SYF
0.68
0.69
5.45%
Friday
BTO
INTERPUBLIC GRP
IPG
0.28
0.27
0.00%
Friday
BTO
MANPOWER INC WI
MAN
1.71
1.86
5.26%
Friday
BTO
EURONET WORLDWD
EEFT
1.29
1.01
4.71%
Friday
BTO
ALTRA INDUS MOT
AIMC
0.35
0.43
7.69%
Friday
BTO
OFG BANCORP
OFG
0.25
0.03
-3.85%
Friday
BTO
LINCOLN ELECTRC
LECO
0.83
0.89
0.00%
Friday
BTO
TCF FINL CORP
TCB
0.3
0.29
6.90%
Friday
BTO
PRECISION DRILL
PDS
-0.16
-0.06
25.00%
Friday
BTO
SOUTH STATE CP
SSB
1.16
1.12
6.31%
Friday
BTO
SENSIENT TECH
SXT
0.81
0.77
6.33%
Friday
BTO
METSO CORP -ADR
MXCYY
N/A
0.08
Friday
BTO
WEBSTER FINL CP
WBS
0.53
0.54
1.92%
Friday
BTO
ERICSSON LM ADR
ERIC
0.12
0.16
-28.57%
Friday
BTO
POTLATCH CORP
PCH
0.7
0.53
85.71%
Friday
BTO
VOLVO AB-B
VLVLY
0.18
N/A
-42.86%
Friday
BTO
WIPRO LTD-ADR
WIT
0.14
0.14
-14.29%
Friday
AMC
SAP AG ADR
SAP
0.79
0.83
-2.56%
Friday
N/A
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Reassuring Start to Q3 Earnings Season
The big banks have given us a reassuring start to the Q3 reporting cycle. If this trend continues next week when a broad and representative cross section of corporate America is on deck to come out with quarterly results, then we will have a tangible reason to get optimistic about the overall earnings picture.
J.P. Morgan (JPM - Free Report) stayed true to its well-earned reputation for operational excellence, with solid gains in both consumer banking as well as in its capital markets platform. In consumer banking, the core loan portfolio was up a robust +15% from the same period last year on essentially flat net-interest margin. On the investment banking side, J.P. Morgan came out with momentum in both capital markets as well as on the advisory side.
On the markets side, J.P. Morgan’s trading volumes benefited from the post-Brexit surge, which management indicated has continued into Q4 as well. Overall markets revenue was up more than +20%, largely reflecting momentum in fixed income, currencies and commodities. We saw this positive capital markets trend in the Citigroup (C - Free Report) report as well, which has favorable read-throughs for the Goldman Sachs (GS - Free Report) report on Tuesday and Bank of America (BAC - Free Report) report on Monday. The Wells Fargo (WFC - Free Report) report was solid as well, but the issue with them is more about political scrutiny, negative headlines and potential litigation and not earnings, at least no at this stage.
It will be interesting if this positive start from the major banks will continue with the other banks who are reporting this week. Bank earnings continue to be shackled by low interest rates, which have been weighing on the group’s margins. The interest rates question is of course very complicated, as it not only reflects the market’s evolving Fed view, but also the widespread incidence of negative yields in many other developed markets. Current consensus expectations for the group for the coming quarters and beyond reflect a notable improvement in this situation, particularly with respect to margins, as the chart below of annual Finance sector margins, shows.
This week’s reporting docket isn’t just about banks and the broader Finance sector, we have more than 240 companies reporting results this week, including 80 S&P 500 members from a cross section of all major sectors. We will have a pretty good sense of how the Q3 earnings season is unfolding by the end of this week.
Q3 Earnings Season Scorecard (as of 10/14/2016)
Including the bank earnings reports, we now have Q3 results from 34 S&P 500 members. Total earnings for these 34 S&P 500 members are up +1.3% from the same period last year on +2.9% higher revenues, with 79.4% beating EPS estimates and 64.7% coming ahead of revenue estimates. The table below shows the scorecard of these 34 index members.
This is better performance than we have seen from the same group of 34 index members in other recent periods, as the comparison charts below show.
The picture emerging from the above comparison chart would be in-line with our modestly favorable commentary on the Q2 earnings season when we were detecting an ever-so-slight improvement in the growth picture. Earnings growth was in negative territory in Q2 – the 5th quarter in a row of earnings declines for the index – but the pace of declines was nevertheless an improvement over what we had seen in the preceding two quarters. This gave rise to the narrative that the worst was likely behind us now on the growth front and that the picture will steadily be improving going forward.
For the Finance sector, we have Q3 results from only 5 sector members. But these 5 combined account for more than a fifth of the sector’s total market cap in the index. Total earnings for these 5 sector companies (includes J.P. Morgan, Citigroup & Wells Fargo) are up +1.3% from the same period last year on +2.9% higher revenues, with all of them beating EPS and revenue expectations (100% beat %).
This is better performance than we have seen from these banks in a while, as the below comparison charts show.
Q3 Expectations As a Whole
The strong results from the major banks has helped improve the overall Q3 growth expectations, with total Q3 earnings for the S&P 500 index now expected to be down -2.2% from the same period last year on +1.5% higher revenues. This would compare to 2016 Q2 earnings growth of -2.8% on +0.2% higher revenues.
The table below shows the summary picture for Q3 earnings, revenues and margins contrasted with the corresponding results from the previous quarter.
As you can see, Energy still remains the biggest drag on the aggregate growth picture, with Autos and Transportation as the other major growth laggards. Tough comparisons at Ford (F - Free Report) and the air carriers, particularly United (UAL - Free Report) and American (AAL - Free Report) , explain the growth issues in those two sectors.
For the two biggest sectors, Technology earnings are expected to be down -1.7% on -1.1% lower revenues while Finance earnings are expected to be up +8.5% on +1.4% higher revenues. The Tech decline is solely a function of Apple (AAPL - Free Report) , which is expected to see earnings decline -20.6% from the same period last year on -9.6% lower revenues. Excluding the Apple drag, the Tech sector’s earnings would be up +3.0%.
Expectations Beyond Q3
The chart below shows current bottom-up consensus earnings expectations for the index in 2016 Q3 and the following four quarters contrasted with actual results in the preceding four quarters. Please note that the columns represent bottom-up earnings totals for each quarter in billions of dollars while the line represents the quarterly growth rates. As you can see, positive growth is expected to resume from Q4 (+5.2%), with the growth pace expected to ramp up meaningfully in the following quarters.
The Energy sector drag is expected to end in 2016 Q4 and beyond, as the chart below of the sector’s earnings shows.
The improved Energy sector outlook makes sense, given shifting comparisons and the recent momentum in oil prices. But we will have to wait to find out if estimates for the other sectors will hold up as companies report Q3 results and provide guidance for Q4 and beyond.
It will be interesting to see if the decelerated pace of negative revisions that we saw the last earnings season will get repeated this time as well.
Note: Sheraz Mian regularly provides earnings analysis on Zacks.com and appears frequently in the print and electronic media. In addition to this Earnings Preview article, he publishes the Zacks Earnings Trends report every week.
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Here is a list of the 244 companies reporting this week, including 80 S&P 500 member.