For Immediate Release

Chicago, IL – September 28, 2018 – Zacks Director of Research Sheraz Mian says, “For Q3 as a whole, total earnings are expected to be up +17.7% in Q3 from the same period last year on +7.2% higher revenues, the 6th time in the last 7 quarters of double-digit earnings growth.”

Looking Ahead to Q3 Earnings Season

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:

• Q3 earnings season will take the spotlight with the JPMorgan (JPM Quick QuoteJPM - Free Report) earnings release on October 12th, but the reporting cycle has officially gotten underway already, with results from 12 S&P 500 members out.
• It is premature to draw any conclusions from the results thus far, but they are nevertheless on the weaker side relative to what we had seen from the same group of 12 index members in other recent periods.
• For Q3 as a whole, total earnings are expected to be up +17.7% in Q3 from the same period last year on +7.2% higher revenues, the 6th time in the last 7 quarters of double-digit earnings growth.
• Q3 earnings growth is expected to be in double-digits territory for 10 of the 16 Zacks sectors, with Energy, Finance, Construction, Basic Materials and Technology sectors with the strongest growth and Conglomerates and Autos expected to experience modest earnings declines.
• Estimates for Q3 came down as the quarter got underway, in contrast to the positive revisions trend that we have been experiencing in the comparable periods of the last three earnings seasons. This revisions trend is in-line with the long-run historical trend (beyond the last three quarters).
• Growth in Q2 reached its highest level since 2010 at +25.4% earnings growth on +9.8% revenue gains, eclipsing the pace set in 2018 Q1. 
• For the small-cap S&P 600 index, total Q3 earnings are expected to be up +20.7% from the same period last year on +7.1% higher revenues. This would follow +32.8% earnings growth on +9.9% revenue growth in 2018 Q2.
• For full-year 2018, total earnings for the S&P 500 index are expected to be up +20.7% on +6.4% higher revenues. For full-year 2019, total earnings are expected to be up +9.8% on +5.1% higher revenues.
• The implied ‘EPS’ for the index, calculated using current 2018 P/E of 18.5X and index close, as of September 18th, is $157.72. Using the same methodology, the index ‘EPS’ works out to $173.18 for 2019 (P/E of 16.8X). The multiples for 2018 and 2019 have been calculated using the index’s total market cap and aggregate bottom-up earnings for each year.  

The estimate revisions trend shifted over the preceding three quarters, from negative to positive, as another by product of the tax-law change. But this effect has started wearing off already, with estimates for the 2018 Q3 coming down since the quarter got underway. Estimates have come down for 13 of the 16 Zacks sectors, with Staples, Discretionary, Conglomerates, Autos and Business Services experiencing relatively more notable negative revisions.

Of the two largest earnings contributors to the S&P 500 index, Technology and Finance, estimates have come down for the Finance sector while Tech sector estimates have modestly gone up. The positive revisions trend for the Tech sector isn’t across the board, with some major players like Apple (AAPL Quick QuoteAAPL - Free Report) and Alphabet (GOOGL Quick QuoteGOOGL - Free Report) experiencing positive estimate revisions while others like Facebook experiencing estimates cuts.

The growth picture remains very strong, even though it is expected to decelerate in the current and coming quarters. But more important than the growth rate is the revisions trend, which reversed course after staying broadly positive over the last three quarters.

Given the ongoing strength in the U.S. dollar, questions about the global economy and all-around trade uncertainty, it is possible that estimates for Q3 and beyond continue coming down in the coming days.

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.