Fed in Focus as 2013 Q3 Earnings Season Gets Underway - Earnings Preview
September 13 2013 - 3:07AM
Zacks
Fed in Focus as 2013 Q3 Earnings Season Gets
Underway
The market’s focus is justifiably on the Fed this week, given
expectations that the FOMC will start ‘Tapering’ its bond-purchase
program. Also of interest will be the FOMC members’ updated
economic forecasts and the Bernanke press conference where the
outgoing Fed Chairman will try to explain their ‘Taper’ decision,
or lack thereof.
Some in the market continue to hope that the Fed will hold off on
the ‘Taper’ decision this week given the still-tepid economic
picture and the potentially destabilizing upcoming budget and
debt-ceiling debates in Congress. With the Syria debate now moving
to the background, Congress’s attention will be shifting to these
divisive topics in the coming days, not to mention a potentially
noisy Senate confirmation battle for Larry Summers as the next Fed
Chairman, should he get the nod as many speculations seem to
suggest.
Please check out the very informative post by Nick Kalivas on the
evolving monetary policy picture and the issues facing the Fed.
Click here.
The Fed will no doubt be the big subject this week, but we are
getting close to the start of the 2013 Q3 earnings season as well.
In fact, the Q3 earnings season will actually get underway this
week with the earning release from Adobe Systems (ADBE) after the
close on Tuesday, followed by reports from such bellwethers as
FedEx (FDX) and Oracle (ORCL) on Wednesday.
Alcoa (AA) typically gets credited for kick-starting each earnings
season, but since we count all companies with quarters ending in
August as part of our Q3 tally, the Q3 earnings season will have
gotten underway weeks before Alcoa reports on October 8th. It will
be interesting to see how much attention the aluminum giant’s
earnings report will get this earnings season since it will have
lost its position in the Dow Jones Industrial Average. In total, we
have 20 companies reporting Q3 results this week, including 5
S&P 500 members.
As has been the case at the start of recent quarterly earnings
cycles, expectations for the Q3 earnings season have fallen sharply
over the last three months. Total earnings for companies in the
S&P 500 are now expected to be up only +1.3% from the same
period last year. This is down materially from what was expected at
the start of the quarter in early July, as the chart below
shows.
This negative revisions behavior is hardly unusual as we have been
repeatedly seeing this pattern play out in recent quarters.
Companies have been overwhelmingly guiding lower, prompting
analysts to cut estimates for the following quarter. The revisions
behavior ahead of the Q2 earnings season was no different and most
of the same sectors have experienced negative revisions this time
around as well. The ‘regulars’ on the negative estimate revisions
beat include Technology, Basic Materials, and Industrials. But
Retail and Consumer Discretionary have played material roles in
bringing down expectations for Q3.
The chart below compares the Q3 total earnings growth expected
for these five sectors at the start of the quarter and where those
expectations stand at present
Estimates for other sectors have come down as well, with even the
Finance sector earnings expected to be up +7% now vs. the +8.1%
that was expected in early July. Energy, Utilities, Conglomerates
and even Construction have suffered negative revisions in varying
degrees.
While estimates for Q3 have come down, the same for Q4 and the
following quarters have held up fairly well, as the chart below
shows.
Part of the extremely strong growth expected in Q4 is a function of
easier comparisons, as 2012 Q4 represents the lowest quarterly
earnings total for the S&P 500 in the last six quarters, with
the comps particularly easy for the Finance sector. But it’s not
all due to easy comparisons, as the expected earnings totals for Q4
represent a new all-time quarterly record. Total earnings for the
S&P 500 reached a new record at $255.9 billion in Q2,
surpassing Q1’s $253.9 billion record. But they are expected to
reach $273.6 billion in 2013 Q4, with total earnings growth outside
of Finance expected at +8.5%.
Judging by what has happened over the past year or so, these Q4
estimates will come down as companies share their outlooks on the
Q3 earnings calls. The market didn’t care much as estimates came
down in the last few quarters, hoping for better times ahead. Will
it do the same this time as well, pushing its hopes of earnings
ramp up into 2014? We will find out the answer to that question
over the next two months.
Monday-9/16
- We will get the August Industrial Production index and capacity
utilization numbers in the morning. The expectation is for +0.4%
increase in IP and an uptick in utilization.
- We will also get the September Empire State manufacturing
index, with consensus expectations of a modest improvement from
August’s 8.2 reading.
Tuesday -9/17
- The Fed’s two-day meeting gets underway today.
- August CPI and September homebuilder sentiment index will be
coming out in the morning. The CPI reading is expected to remain
benign and the homebuilder index is expected to remain unchanged
from the prior month’s 59 reading. The recent spike in interest
rates is a net negative for the housing sector and could show up in
this reading.
- The Q3 earnings season gets underway today, with earnings
reports from FactSet Research (FDS) in the morning and Adobe
Systems (ADBE) after the close.
Wednesday-9/18
- The big news of the day is whether the FOMC meeting will result
in the ‘Taper’ announcement or not. Economic projections of FOMC
members and the Bernanke press conference will be other key events
of the day. But the Fed activities will take place in the
afternoon.
- In the morning, we will get the August Housing Starts and
Permits numbers, with expectations of gains on the Starts and a
decline on the Permits fronts.
- FedEx (FDX), General Mills (GIS) and Cracker Barrel (CBRL) will
be the key Q3 earnings reports in the morning, while Oracle (ORCL)
will report after the close.
Thursday -9/19
- Jobless Claims, Existing Home sales, Philly Fed and Leading
Indicators round out a busy economic docket.
- ConAgra (CAG), Pier 1 Imports (PIR) and Rite Aid (RAD) will
report results in the morning.
Friday-9/20
- Nothing major on the economic or earnings calendars.
Here is a list of the 20 companies reporting this week,
including 5 S&P 500 members.
Company |
Ticker |
Current Qtr |
Year-Ago Qtr |
Last EPS Surprise % |
Report Day |
Time |
OCLARO INC |
OCLR |
-0.37 |
-0.23 |
-50 |
Monday |
AMC |
FACTSET RESH |
FDS |
1.19 |
1.11 |
-1.71 |
Tuesday |
BTO |
STUDENT TRANSPT |
STB |
0.06 |
0.06 |
-60 |
Tuesday |
BTO |
ADOBE SYSTEMS |
ADBE |
0.21 |
0.45 |
14.29 |
Tuesday |
AMC |
DIGITAL CINEMA |
DCIN |
-0.12 |
-0.23 |
-78.57 |
Tuesday |
AMC |
TOWER GRP INTL |
TWGP |
-0.62 |
-0.34 |
5.66 |
Tuesday |
N/A |
FEDEX CORP |
FDX |
1.5 |
1.45 |
8.67 |
Wednesday |
BTO |
GENL MILLS |
GIS |
0.7 |
0.66 |
-1.85 |
Wednesday |
BTO |
CRACKER BARREL |
CBRL |
1.35 |
1.47 |
7.37 |
Wednesday |
BTO |
ORACLE CORP |
ORCL |
0.53 |
0.49 |
0 |
Wednesday |
AMC |
CLARCOR INC |
CLC |
0.66 |
0.6 |
-1.49 |
Wednesday |
AMC |
HERMAN MILLER |
MLHR |
0.38 |
0.38 |
19.44 |
Wednesday |
AMC |
STEELCASE INC |
SCS |
0.25 |
0.25 |
0 |
Wednesday |
AMC |
APOGEE ENTRPRS |
APOG |
0.21 |
0.17 |
-17.65 |
Wednesday |
AMC |
CONAGRA FOODS |
CAG |
0.41 |
0.44 |
1.69 |
Thursday |
BTO |
PIER 1 IMPORTS |
PIR |
0.21 |
0.19 |
0 |
Thursday |
BTO |
IHS INC-A |
IHS |
0.75 |
0.7 |
1.45 |
Thursday |
BTO |
RITE AID CORP |
RAD |
-0.04 |
-0.05 |
0 |
Thursday |
BTO |
MARCUS CORP |
MCS |
0.46 |
0.37 |
-6.25 |
Thursday |
BTO |
TIBCO SOFTWARE |
TIBX |
0.15 |
0.2 |
0 |
Thursday |
AMC |
ALCOA INC (AA): Free Stock Analysis Report
ADOBE SYSTEMS (ADBE): Free Stock Analysis Report
CONAGRA FOODS (CAG): Free Stock Analysis Report
CRACKER BARREL (CBRL): Free Stock Analysis Report
FACTSET RESH (FDS): Free Stock Analysis Report
FEDEX CORP (FDX): Free Stock Analysis Report
GENL MILLS (GIS): Free Stock Analysis Report
ORACLE CORP (ORCL): Free Stock Analysis Report
PIER 1 IMPORTS (PIR): Free Stock Analysis Report
RITE AID CORP (RAD): Free Stock Analysis Report
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