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

[winston]

3Q Earnings

Through the end of last week, 92% of the S&P 500's companies have released earnings. A huge 75% of those companies reported an earnings-per-share beat, versus the five-year average of 72%. Earnings have tended to be 3.9% better than expected.

Sales have also been better than expected, too. So far this season, 60% of companies have reported better-than-expected sales. And those sales have been 0.8% above expectations. The blended revenue growth rate has been 3.1%, picking up steam from 2.8% a couple of weeks ago.

Companies are prohibited from repurchasing their shares in the weeks leading up to their earnings releases. So the end of the reporting season means they can resume buying back shares.

Source: Daily Wealth

[behappyalways]

Opinion: Semiconductor stocks are bubbly, as companies’ sales are worse than most investors think
https://www.marketwatch.com/story/semic ... od=opinion

[behappyalways]

Earnings recession is expected to swallow all of 2019 after holiday forecasts disappoint
https://www.marketwatch.com/story/earni ... ewer_click

[behappyalways]

Opinion: Companies’ core earnings are more crazily distorted than investors realize, and that puts stocks at risk
https://www.marketwatch.com/story/compa ... ck_seemore

[winston]

US 4Q Earnings

The market is looking for 2% contraction in fourth-quarter earnings (year-over-year).

According to FactSet, in September, the market was looking for 2.5% earnings growth for the fourth quarter.

So, again, we head into earnings season with expectations that have been dialed down.

They've been dialed down because business confidence waned. Business confidence waned because of the perception of a never-ending trade war.

That script has since changed. So the table is set for positive surprises.

Now, let's incorporate this view into the valuation on stocks, as we end the week after printing new record highs.

The market goes out at 18.5 times forward earnings (earnings expectations for the next 12 months). That is still cheap, considering we have a 10-year yield, still, at 1.8% (ultra-low levels).

As we've discussed, historically when rates are at lows, valuations on stocks tend to run north of 20.

If the market is, again, underestimating earnings, then the market is cheaper than it appears, at even 18.5 times forward earnings.

Source: Forbes

[winston]

Majority of S&P companies beat analyst forecasts

So far, about 53 percent of S&P 500 companies have reported their results for the October-December quarter.

Of those companies, nearly 70 percent have issued results that beat analysts’ forecasts for profits, according to S&P Global Market Intelligence.

Source: The Standard

https://www.thestandard.com.hk/breaking ... -forecasts

[winston]

FactSet's summation of what it expects from Q1

Earnings Growth: For Q1 2020, the estimated earnings decline for the S&P 500 is -7.3%. If -7.3% is the actual decline for the quarter, it will mark the largest year-over-year decline in earnings reported by the index since Q3 2009 (-15.7%).

Earnings Revisions: On December 31, the estimated earnings growth rate for Q1 2020 was 4.3%. All eleven sectors have lower growth rates today (compared to December 31) due to downward revisions to EPS estimates.

Earnings Guidance: For Q1 2020, 72 S&P 500 companies have issued negative EPS guidance and 32 S&P 500 companies have issued positive EPS guidance.

Valuation: The forward 12-month P/E ratio for the S&P 500 is 15.3. This P/E ratio is below the 5-year average (16.7) but above the 10-year average (15.0).

Earnings Scorecard: For Q1 2020 (with 20 companies in the S&P 500 reporting actual results), 15 S&P 500 companies have reported a positive EPS surprise and 14 S&P 500 companies have reported a positive revenue surprise.

Keep in mind, the differential between analysts' forecasts for price targets and earnings hasn't been this wide in 20 years.

Source: Investor Place

[winston]

2Q US Earnings

Morgan Stanley: While estimates for composite earnings for S&P 500 index companies have fallen significantly in recent weeks, they are still overestimating corporate performance for 2020.

Analysts were predicting $184 earnings-per-share for S&P 500 index companies as of Feb. 28, according to FactSet, and are forecasting $156 today.

MS predicts that by year’s end, that figure will be closer to $140.

Source: Market Watch

[winston]

Analysts 'flying blind' on corporate earnings forecasts

While Wall Street expects profits will be down for most companies in the S&P 500, the focus is on what management teams have to say about what their prospects for profits look like for the rest of the year.

That might prove difficult. With all the uncertainties about when economies may reopen, many companies have simply pulled their profit and sales forecasts for the year altogether.

Given how big and unprecedented the coronavirus shock to the economy has been, analysts are struggling to guess how bad corporate earnings will get hit.

At Deutsche Bank, Chief Global Strategist Binky Chadha said his usual methods of forecasting earnings based on economic growth or surveys measuring business activity “are essentially broken.”

“It’s incredibly hard during normal times to have an economic forecast, but today, you’re kind of flying blind,” said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management. “What companies have to say will be incredibly important.”

Across Wall Street, analysts are forecasting a drop of roughly 10 percent in earnings per share for S&P 500 companies for the first quarter and 21 percent for the second quarter.

It’s going to be a tough couple of quarters for corporate America as the economy will likely take “two steps forward and one step back” as it recovers, said Jeff Buchbinder, equity strategist for LPL Financial.

“We know this is going to be one of the most severe recessions we have ever seen.”

Source: AP

https://www.thestandard.com.hk/breaking ... -forecasts

[winston]

S&P 500 earnings are beating estimates by the lowest rate in a decade amid COVID-19 despite earlier cuts to forecasts

By Tomi Kilgore and Emily Bary

Companies and analysts typically play a game of lowering earnings expectations, to make them more beatable.

Over the past five years, earnings estimates for S&P 500 US:SPX index companies have declined by an average 2.6% during the first two months of a quarter. That’s allowed 73% of companies to beat those lowered estimates.

Estimates took a much larger swing lower this first quarter as analysts went from predicting 4.2% S&P 500 company profit growth in aggregate at the start of the quarter to modeling a decline of 13.7% through Friday morning. But even those dramatic estimate reductions weren’t enough to keep beat rates at their usual levels.

J.P. Morgan equity strategist Mislav Matejka said that only about 65% of the companies that have already reported results are beating estimates, the lowest beat ratio since the 2008 financial crisis.

The current consensus FactSet estimate is for S&P 500 earnings to decline 36% from a year ago, compared with expectations for growth of 5.7% at the start of the year.

Source: Market Watch

https://www.marketwatch.com/story/sp-50 ... ck_seemore