For Immediate Release
Chicago, IL – November 4, 2019 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Ford F, Texas Instruments TXN, Hasbro HAS, Fastenal FAST and Dover DOV.
A Reassuring Earnings Picture
With results from more than 70% of S&P 500 members already out, we have a representative enough sample to judge the Q3 earnings season. The market has generally been appreciative of the the results, with the median index member up almost three times as much in response to its Q3 earnings report relative to the preceding period.
We look at three metrics in evaluating the aggregate picture emerging out of any reporting cycle. These include the growth rates for earnings and revenue, the beats percentages, and management guidance for the coming periods.
Let’s take a look at the Q3 results that have come out already in terms of these three performance metrics.
EPS & Revenue Beats Percentages
For the 357 S&P 500 members that have reported results through Friday, November 1st, 74.5% are beating EPS estimates and 59.7% are beating revenue estimates.
Over the last 12 quarters, the low EPS beats percentage for these 357 index members was 65.3% (2018 Q4) and the high was 81.8% (2018 Q2), with an average EPS beats percentage of 75.5%. The EPS beats percentage in Q3 started out very high, but currently remains towards the high end of this 12-quarter range.
On the revenues side, the beats percentage for this group of 357 index members has been as low as 47.3% (2015 Q3) and as high as 75.9% (2018 Q1) over the preceding 12-quarter period. As is the case with the EPS beats percentage, the Q3 revenue beats percentage remains within this historical range.
In other words, S&P 500 members are beating EPS and revenue estimates at a rate that is about in-line with historical trends.
Q3 Earnings & Revenue Growth
For the 357 index members that have reported Q3 results already, total earnings are down -1.9% while total revenues are up +3.6%.
Please note that ‘total earnings’ mean ‘aggregate net income’ for the 357 S&P 500 members, not mean, median or market-cap weighted EPS. We prefer looking at net income as a measure of earnings and not EPS given the distorting effects of share buybacks on EPS-based growth rates.
As you can see here, there is not much earnings growth, which is a function of the tough comparisons to the 2018 period when growth was boosted by the tax-cut legislation.
The revenue picture is actually pretty good, though the growth pace remains on a decelerating trend.
The Guidance Picture
Many in the market appeared to fear a notable uptick in negative guidance for Q4 and beyond, in the wake of renewed signs of deceleration in the global and U.S. economy. Weak guidance from a number of companies like Ford, Texas Instruments, Hasbro and others reflect this reality. But a preponderance of negative guidance from across all major sectors has failed to materialize. In other words, there is no material deterioration in the earnings picture relative to what was expected earlier; Q3 results and guidance for the current and coming quarters has been better than ‘feared’.
The market’s positive reaction to reports from the likes of Fastenal, Dover and a number of the banks likely reflects this ‘better than feared’ aspect of the results.
That said, estimates for the current and coming quarters has been coming down since the Q3 earnings season got underway. The negative revisions trend appears to have accelerated over the last few days
Join us on Facebook: https://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.
Zacks Investment Research
800-767-3771 ext. 9339
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 https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Ford Motor Company (F) : Free Stock Analysis Report
Fastenal Company (FAST) : Free Stock Analysis Report
Dover Corporation (DOV) : Free Stock Analysis Report
Hasbro, Inc. (HAS) : Free Stock Analysis Report
Texas Instruments Incorporated (TXN) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research