For Immediate Release
Chicago, IL – August 22, 2016 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Best Buy (BBY), Tiffany (TIF), Dollar Tree (NASDAQ:DLTR) (DLTR), Dollar General ( DG) and Amazon (NASDAQ:AMZN) (AMZN).
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Looking Beyond Q2 Earnings Season
The Q2 earnings season is now effectively behind us, as even Retail sector earnings reports are mostly out now. With results from 480 S&P 500 already out and another 13 index reports reporting results this week, we will have seen Q1 results from 493 index members by the end of this week.Best Buy (BBY),Tiffany (TIF), Dollar Tree (DLTR) and Dollar General ( DG) are this week’s notable earnings releases.
Our overall commentary on the Q2 earning season has been less negative compared to the last few reporting cycles. This reflects an ever-so-modest improvement in the growth picture, both for Q2 as well as the current period. Growth has been in negative territory for a while now, with Q2 as the 5th quarter in a row of earnings declines for the S&P 500 index. The Energy sector has been, and continues to be, a big drag on the overall growth picture. But we can’t blame Energy alone for all the growth challenge; there is simply not much momentum from the other major sectors either.
Estimates for the current period (2016 Q3) have started coming down as well, in-line with the trend that we have become used to seeing over the last few years. Earnings growth for the index is now expected to be in negative territory in Q3 as well, with the last quarter of the year as the only period this year expected to have positive growth.
As negative as this revisions trend looks, it is nevertheless an improvement over what we have become used to seeing by this stage in other recent reporting cycles. The improved commodity-price backdrop and the reduced dollar drag are some of the more plausible explanations for this development.
Expectations Beyond Q3
Q3 is now in negative territory as well, with the last quarter of the year as the only one that is currently expected to be in positive territory.
The Energy sector drag is expected to end in 2016 Q4. We will see if those estimates will hold up as we reach the last quarter of the year. But given what we have seen over the last few quarters, the odds don’t look that favorable.
Retail Sector’s Q2 Results
As of Friday August 19th, we have seen Q2 results from 37 retailers in the S&P 500 index (out of the 44 total) that combined account for 93.6% of the sector’s total market cap in the index. Total earnings for these 37 retails are up +3.9% from the same period last year, on +4.3% higher revenues, with a relatively low 59.5% beating EPS estimates and a very low 43.2% coming ahead of top-line expectations.
The growth comparisons (left hand chart) don’t stand out – Q2 earnings growth rate is above the 4-quarter average, but about in-line with 12-quarter average. But the right hand chart, which is tracking the proportion of Retail sector stocks coming out with positive EPS and revenue surprises, shows that Q2 is notably weaker relative to the recent past.
The fact is that the 59.5% EPS beat % for the Retail sector is the second lowest for the entire S&P 500 index, behind only the Construction sector. The revenue beat % of 24% for the sector is the third lowest (Construction is the lowest at 38.5%) of all 16 sectors at this stage.
With respect to the growth picture, which appears to be in-line with the recent past, we have to dig a bit deeper to adjust the sector’s growth picture for Amazon’s (AMZN) blockbuster Q2 earnings report. Q2 is tracking way below what we have been seeing from these same retailers in the recent past.
The Q2 Earnings Scorecard (as of August 19th)
We now have Q2 results from 480 S&P 500 members that combined account for 97.3% of the index’s total market capitalization. Total earnings for these 480 companies are down -3.2% from the same period last year on +0.1% higher revenues, with 72.1% beating EPS estimates and 54% coming ahead of top-line expectations.
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BEST BUY (BBY): Free Stock Analysis Report
TIFFANY & CO (TIF): Free Stock Analysis Report
DOLLAR TREE INC (DLTR): Free Stock Analysis Report
DOLLAR GENERAL (DG): Free Stock Analysis Report
AMAZON.COM INC (AMZN): Free Stock Analysis Report
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