Uninspiring Start to Q1 Earnings Season - Earnings Outlook
March 26 2014 - 4:01AM
Zacks
The following is an excerpt from this week's Earnings Trends
article. To see the full article, please click
here.
Uninspiring Start to Q1 Earnings Season
The first quarter comes to an end in a few days, but the 2014 Q1
earnings season has already gotten underway. By April 1st, we will
have seen results from almost 15 S&P 500 members (companies
with fiscal quarters ending in February get counted as part of the
Q1 tally).
Many of these early reporters aren’t obscure players as the list of
companies that have reported results already include industry
leaders like FedEx (FDX), Nike
(NKE), Oracle (ORCL), Walgreens
(WAG) and others. These initial reports don’t inspire much
confidence and appear to be pointing towards another underwhelming
reporting season ahead. But it’s perhaps premature to draw any firm
conclusions based on such an unrepresentative sample of
reports.
Expectations for the Q1 earnings season as whole remain low, with
total earnings expected to be down -1.8% from the same period last
year on +0.9% higher revenues and modestly lower margins.
As has been the trend for
more than a year now, estimates for Q1 came
down sharply as the quarter unfolded. The current -1.8% decline in
total earnings in Q1 is down from +2.1% growth expected at the
start of the quarter in January.
The -2.4% decline to total S&P 500 earnings since the start of
Q1 in January is greater than what we witnessed in the comparable
period in 2013 Q4, but is broadly in-line with the magnitude of the
4-quarter average of negative revision.
The chart below shows the magnitude of negative earnings revision
for 2014 Q1 and each of the preceding four quarters over the course
of each quarter.
Estimates for Q1 have fallen across the board, but the trend is
particularly notable for the Retail, Basic Materials, Autos,
Consumer Staples, and the Energy sectors, as the chart below
shows.
With two-thirds of S&P 500 members typically beating earnings
estimates in any reporting cycle, actual Q1 results will almost
certainly be better than these pre-season expectations. But Q1 is
unlikely to repeat the performance of the last few quarters when we
would witness new all-time records for total earnings each
quarter.
Guidance has been overwhelmingly weak for more than a year now,
keeping the revisions trend firmly in the negative direction. Odds
are that we wouldn’t see any change on that front this earnings
season either, bringing down estimates for the rest of the year.
Investors haven’t cared about negative estimate revisions thus far,
but it will be interesting that behavior will remain in place going
forward as well.
To see the full Earnings Trends report, please click
here.
ADOBE SYSTEMS (ADBE): Free Stock Analysis Report
FEDEX CORP (FDX): Free Stock Analysis Report
GENL MILLS (GIS): Free Stock Analysis Report
GOLDMAN SACHS (GS): Free Stock Analysis Report
JPMORGAN CHASE (JPM): Free Stock Analysis Report
ORACLE CORP (ORCL): Free Stock Analysis Report
WALGREEN CO (WAG): Free Stock Analysis Report
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