Results to retain results from the fourth quarter to present

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The positive market momentum over the last few days is probably not a reflection of its positive results, but rather the optimism generated by some macroeconomic concerns that weighed on market sentiment in the final quarter of 2018.

This does not mean that the fourth quarter results are bad; they are not. But rather they are not so good that the market would encourage them.

We probably should not be too specific in our findings on the fourth quarter earnings season at this point. After all, we found the results of only 11% of S & P 500 index members and the sample of results at this stage mainly concerns the finance sector. The Q4 reporting cycle is accelerating significantly this week, with 56 other S & P 500 members representing all major sectors, with quarterly results.

Here are the highlights of the Q4 earnings season after seeing the results of 55 members of the S & P 500 Index until Friday, January 18th.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "First, growth slows down. This is not a surprise, as we already knew that growth in Q4 would be significantly lower than in the first three quarters of the year. "Data-reactid =" 15 ">First, growth slows down. This is not a surprise, as we already knew that the growth of Q4 would be significantly lower than the pace of the first three quarters of the year.

The total earnings of the 55 members of the index who reported are up + 16.9% compared to the same period last year, with revenues up + 9%. The growth in revenues and revenues of the same business cohort was + 22% and + 9.7% in the previous earnings season. The comparison chart below places this deceleration of growth in a historical context for these 55 members of the index.

The pace of growth is slowing further in the current and future quarters, as will be shown later.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Second, positive surprises are difficult to find, especially on the income side. "data-reactid =" 34 ">Second, positive surprises are difficult to find, especially on the income side.

For the 55 members of the index who have already reported their results, 70.9% beat the EPS estimates and only 56.4% of the income estimates. For the same cohort of firms, the proportion of positive EPS and unexpected revenue was 83.6% and 60% for the third quarter earnings season. The tables below compare the percentages of time in the fourth quarter in a historical context for these 55 companies.

Positive recipes are not so hard to find in a while. In fact, as shown in the graph below, the proportion of positive revenue surprises in Q4 is the lowest of the last three years.

The story continues

With such positive surprises for the fourth quarter, one might reasonably think that the estimates may have been too high. We know this is not the case, as the estimates for the quarter have fallen to the most of all other recent periods.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Third, estimates for 2019 in the first quarter and for the full year of 2019 fall significantly, with the first-quarter growth rate likely to fall into negative territory. "data-reactid =" 74 ">Third, estimates for 2019 in the first quarter and for the full year of 2019 fall significantly, with the first-quarter growth rate likely to fall into negative territory.

The chart below shows the evolution of the estimates for the first quarter of 2011 since the end of November 2018.

Negative revisions to the first quarter 2019 estimates are consistent with those we observed prior to the start of the fourth quarter earnings season. Estimates for the year 2019 have also decreased, as shown in the graph below.

This chart tracks consensus earnings growth forecasts since the beginning of the second half of 2018. As you can see, the estimates remained unchanged in the September quarter, but their downward trend has been consistent since the beginning of October. . Many in the market suspect that estimates have yet to fall before stabilizing.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Key Results Reports This Week"data-reactid =" 110 ">Key Results Reports This Week

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Monday 21st January: No publication due to MLK party "data-reactid =" 111 ">Monday 21st January: No release because of MLK vacations

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Tuesday January 22nd: We have 11 index members who publish results on Tuesday, with Johnson & Johnson (JNJ) and Comcast (CMCSA) as major publications in the morning and IBM (IBM) after the close of the market. "Data-reactid =" 112 ">Tuesday January 22nd: We have 11 index members who publish results on Tuesday, with Johnson & Johnson (JNJ) and Comcast (CMCSA) as key morning news releases and IBM (IBM) after the market close.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Wednesday, January 23: We have 20 members of the S & P 500 reporting results that day, with Proctor & Gamble (PG) in the morning and Ford (F) at night as major. "Data-reactid =" 113 ">Wednesday, January 23: We have 20 members of the S & P 500 reporting results that day, with Proctor & Gamble (PG) in the morning and Ford (F) at night as major.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Thursday, January 24: We have 20 other index members on deck who will release the results on Thursday, with Intel (INTC) and Starbucks (SBUX) as major reporters, both after the market closes. "Data-reactid =" 114 ">Thursday, January 24: We have 20 other members of the index on the bridge that will release results on Thursday, with Intel (INTC) and Starbucks (SBUX) as major reporters, both after the market closes.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Friday, January 25: 6 other members of the index report their results Friday, every morning. "Data-reactid =" 115 ">Friday, January 25: 6 other members of the index report results Friday, every morning.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Dashboard of the Q4 earnings season (from January 18, 2019) "data-reactid =" 116 ">Dashboard of the Q4 earnings season (from 18 January 2019)

We now have the fourth quarter results of 55 members of the S & P 500 index together accounting for 15.1% of the total market capitalization of the index. The total income of these 55 members of the index is up 16.9% over the same period last year, with revenues up 9%, 70.9% of earnings estimates per share and 56.4% of revenue estimates.

For the financial sector, fourth quarter results now represent 45.8% of the sector's total market capitalization in the S & P 500. The total earnings of these financing companies are up + 15.8% per annum. compared to the same period last year, with revenues up 3.9%, 72.7% higher than estimates of EPS and 45.5% of revenue.

The tables below compare financial sector results in the fourth quarter in a historical context.

For the whole of the fourth quarter, the total profit of the S & P 500 index should increase by + 10.7% compared to the same period of the previous year, by + 5.3%, which would follow to earnings growth of + 25.7% over + 8.4% 2018 Q3.

Earnings growth should be double-digit for 8 of the 16 Zacks sectors, with energy being the strongest growth (+ 60.5%), finance (+ 20.3%), construction (+ 24.5%) and transport (+ 25.5%). . Profits in the technology sector should slow sharply in Q4, up + 3.8%, after two consecutive quarters of very strong growth. The pace of growth in the technology sector has experienced the biggest slowdown in recent days as analysts have adjusted their estimates downward as a result of Apple's prior statement.

Three sectors are expected to post lower earnings in the fourth quarter compared to the same period of the previous year, namely conglomerates (-13.1%), automobiles (-15.4%) and utilities (- 7.3%).

The table below presents the summary table for the fourth quarter, compared to what was done in the previous earnings season.

The chart below shows the fourth-quarter earnings and revenue growth forecast relative to the next three quarters and actual results for the previous four quarters. As you can see in the graph below, the pace of growth should slow significantly compared to what we experienced in the first three quarters of the year.

The chart below shows the same data over a rolling four-quarter period.

Whether we look at growth on a quarterly or slippery basis, there is no doubt that the growth spurt is now behind us. The question now is how many estimates for the next quarters are to fall further. And the answer to this question will depend on the changing economic context we discussed at the beginning.

For more details on the overall results situation, the fourth quarter earnings season and forecasts for future periods, see our weekly report on earnings trends.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Note: Sheraz Mian manages the Zacks Equity Research Department. He is a recognized profit expert whose comments and analysis are published on Zacks.com and in print and electronic media. His articles on weekly earnings include Earnings trends and Earnings overview."data-reactid =" 193 ">Note: Sheraz Mian manages the Zacks Equity Research Department. He is a recognized profit expert whose comments and analysis are published on Zacks.com and in print and electronic media. His articles on weekly earnings include Earnings trends and Earnings overview.

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