Earnings (General News) 02 (Oct 16 - Dec 25)

[winston]

Q3 Earnings Preview: Stocks Expecting 50%-Plus Growth

by MATTHEW GALGANI

Source: Investor's Business Daily

https://finance.yahoo.com/m/0b4f20fe-0b ... tocks.html

[winston]

Start of the Q3 Earnings Season

by Sheraz Mian

Total Q3 earnings for the S&P 500 index are expected to be up +3.2% from the same period last year on +5% higher revenues. This would follow double-digit earnings growth in each of the preceding two quarters.

Earnings growth for Q3 drops to +1.3% (from +3.2%) when the strong Energy sector contribution is excluded from the aggregate picture.

The Conglomerates sector is the only other sector, in addition to Energy, with double-digit earnings growth in Q3.

Growth is expected to be strong for the Technology sector as well, with Tech earnings expected to be up +9.7% from the same period last year on +6.7% higher revenues.

Q3 earnings growth is expected to be in negative territory for 7 of the 16 Zacks sectors, with double-digit declines for the Autos, Basic Materials, Aerospace, and Transportation sectors.

Source: Zacks

https://finance.yahoo.com/news/start-q3 ... 07668.html

[winston]

With more than three-fourths having reported, S&P 500 companies are expected to have increased profits by 7.7 percent in the third quarter, up from an expectation of 5.9 percent growth at the start of October, according to Thomson Reuters I/B/E/S.

Source: Reuters

[winston]

3Q, 2017

With 81% of the S&P 500 companies reported for the third quarter, the numbers have continued to be very good: 74% have beat the Street’s earnings estimates, 66% have beat on revenues.

So we’ve now had 13.9% year-over-year (YOY) growth in S&P 500 earnings in the first quarter, 11.3% year-over-year earnings growth in the second quarter, and 5.9% YOY growth in the third quarter.

And these are companies that are as lean and financially sound as they’ve been in a long time.

Source: Forbes

[winston]

The hidden danger bulls are missing

by Jim Rickards

The simplest form of stock market valuation is to project earnings, apply a multiple and, voilà, you have a valuation.

Multiples are already near record highs, so there’s not much room for expansion there.

Earnings are likely to fall short of expectations, which can lead to a correction. Once that happens, multiples can shrink as well. Soon you’re in a full-scale bear market with stock prices down 20% or more.

Source: Defense and Technology Alert

http://thecrux.com/rickards-the-hidden- ... e-missing/

[winston]

With 68% of the components of the S&P 500 having already reported their fourth-quarter earnings, the S&P has a blended earnings growth rate of 14% year-over-year.

Source: Fact Set

[winston]

Strong Earnings, but Even Stronger Earnings Expectations

As of this writing, the estimated earnings growth rate for the S&P 500 in the first quarter is +17%, which (if it stands) would mark the highest quarterly earnings growth rate since Q1 2011 (+19.5%).

So, we could be looking at the highest earnings growth rate in seven years. That's big, particularly this deep into an economic expansion, and also in light of some of the uncertainty afflicting the market of late.1

But we believe that there's a bigger story here. A closer look reveals a near record-breaking increase in earnings estimates looking ahead for 2018.

The first two months of the first quarter marked the biggest increase in the annual earnings-per-share (EPS) estimates since tracking began in 1996. From Dec. 31 through Feb. 28, the bottom-up EPS estimate for 2018 increased by a staggering +7.3%. CEOs appear to be as optimistic as ever.3

What's more, rising earnings expectations aren't limited to a certain part of the economy - the estimate increases are broad-based. At the sector level, nine of the eleven S&P 500 sectors recorded an increase in their bottom-up S&P 500 EPS estimates during the first two months of the quarter, led by:
1. Energy (+18.9%)
2. Telcos (+14.8%)
3. Financials (+11.5%)

In short, U.S. corporations are hopeful that they're going to make even more money this year than they originally thought. While that sounds - and is - wonderful, it also raises the bar for earnings, thereby increasing the probability that a company could fall short.

In my view, stocks perform best when corporations surprise the street with earnings that far exceed expectations - an event generally known as a "positive surprise." The opposite holds true as well in my opinion, whereby stock gains tend to moderate when earnings aren't quite what the street expected.

To the extent that earnings throughout the year fall in-line or short of expectations, I think we could see some limitations to stocks' upside potential in 2018.

Bottom Line for Investors

My bottom line for investors this week can be summed up with a single equation: Earnings Estimates + Tariffs + Tech Regulation = 2018's "Wall of Worry."

I've asserted that 'too high' earnings expectations could limit stocks' upside potential, but it's important to note that I still very much think stocks have upside potential. That's because I think that tariffs, a high bar for earnings, and new regulations for the technology industry all contribute to the construction of a shiny, brand new, "wall of worry."

When I think of all the aforementioned negative forces together, I believe we'll see a pattern develop that I've seen numerous times in my decades as an equity investor. It goes like this:
Phase 1: A negative (like tariffs, a trade war, and regulation) surfaces.
Phase 2: Market participants fear the worst, and rush to price-in the worst-case scenario.
Phase 3: Volatility ensues and talk of a bear market increases (we're at this phase today in my view).
Phase 4: Over time, market participants realize that the feared negative did not turn out to be as bad as everyone originally expected.
Phase 5: The market resumes its upward, longer-term trajectory.

Stocks have an uphill battle with a few nagging headwinds, and we'll be watching them develop closely. But I think we'll see phases 4 and 5 in the not-too-distant future.

Source: Zack's

[winston]

As of Friday, 80% of the S&P 500 companies that have reported have beat earnings estimates.

And 72% have beat revenue estimates.

Source: Forbes

[winston]

2Q Earnings

For the second quarter, the S&P 500 is projected to report 20% growth in earnings.

This marks the second-highest earnings growth for the index since the third quarter of 2010.

The only better quarter in that span was the first quarter of this year, when S&P earnings shot up 24.8%.

At the center of this is the energy sector. It's recording the largest estimated earnings increases.

In fact, analysts now project earnings for the sector will rise 142.5% year over year. That's up from the initial 115% increase that was forecast at the end of the first quarter.

Source: The Oxford Club

[winston]

2Q US Earnings

Second-quarter earnings have been stellar, with S&P 500 companies reporting earnings growth of 24% and sales increase of 9.8%, according to John Butters, senior earnings analyst at FactSet Research.

Some 80% of companies releasing quarterly results are beating estimates, and if that number holds it will be the highest percentage of companies posting positive earnings surprise since FactSet started tracking such data in the third quarter of 2008, according to Butters.

Source: Market Watch