For Immediate Release
Chicago, IL – April 24, 2017 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Coca Cola (NYSE: KO – Free Report ), Caterpillar (NYSE:CAT) (NYSE: CAT – Free Report ), DuPont (NYSE:DD) (NYSE: DD – Free Report ) and 3M (NYSE: MMM – Free Report ) and Procter & Gamble (NYSE: PG – Free Report ).
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Earnings Growth Accelerates in Q1
We get into the heart of the Q1 earnings season this week, with almost 800 companies reporting results, including 191 S&P 500 members. By the end of this week, we will have crossed the halfway mark in the Q1 reporting cycle, at least for the S&P 500 index, and will have a far clearer view of the overall earnings picture. But with results from almost of a quarter of the index’s total market capitalization already on the books, we have good enough sense of how this earnings season is unfolding.
What we are finding is that not only is an above-average proportion of companies beating estimates, particularly revenue estimates, but growth is steadily accelerating from what we saw in the preceding quarter and on pace to reach its highest level in almost three years. Importantly, estimates for the current period (2017 Q2) appear to holding up nicely as well. Continuation of these trends through the rest of this earnings season should serve as a reassuring development for the market.
As of Friday, April 21st, we have Q1 results from 95 S&P 500 members that combined account for 24.9% of the index’s total market capitalization. Total earnings for these companies are up +14.3% from the same period last year on +4.6% higher revenues, with 72.6% beating EPS estimates and 62.1% beating revenue estimates. The proportion of companies beating both EPS and revenue estimates is 51.6%.
Comparing Q1 Results
The Q1 growth pace is notably tracking above what we had seen from the same group of 95 index members in other recent periods. A big part of the strong growth at this stage is thanks to the Finance sector, but the growth comparison still remains favorable even on an ex-Finance basis.
Finance Sector Scorecard
For the Finance sector, we now have Q1 results from 28 of the sector’s 94 companies that combined account for 48.9% of the sector’s total market capitalization in the index. Total earnings for these 28 Finance sector companies are up +23.0% from the same period last year on +7.7% higher revenues, with all 71.4% beating EPS estimates and 60.7% beating top-line estimates.
This is better earnings growth than we have seen from the same group of 28 banks in other recent periods, which is having a favorable impact on the aggregate Q1 growth expectation for the sector as a whole.
Total Q1 earnings for the Finance sector as a whole, combining the reported actuals with the still-to-come estimates, are expected to be up +14.8% from the same period last year. The sector’s Q1 earnings growth expectations at the medium-industry level contrasted with estimates for the following four quarters and actual results for the preceding four periods.
Please note that the Major Banks industry, of which JPMorgan (NYSE:JPM), Wells Fargo (NYSE:WFC) and others are part, accounts for roughly 45% of the sector’s total earnings (insurance is the second biggest earnings contributor, accounting for about 25% of the total).
Key Earnings Reports for the Week of April 24th
We are into the heart of the earnings season this week, with 191 S&P 500 members reporting results. The major reports this week include:
Coca Cola (NYSE:KO – Free Report ) – Coke comes out with quarterly results before the market’s open on Tuesday April 25th, a very busy day on the reporting cycle with 44 S&P 500 members reporting quarterly results today (of which 27 are in the morning). The company is expected to earn $0.44 per share on $8.97 billion in revenues, representing year-over-year changes of -2.7% and -12.7%, respectively. The stock has lagged the Zacks Consumer Staples sector as well as the S&P 500 index in the year-to-date as well as trailing 12-month periods on lingering questions about the company’s bottler refranchising strategy and outlook for the business. The stock is up +3.7% since the start of the year, but is down -3.4% over the past 12 months. Guidance and management outlook will determine how the stock reacts to this earnings report; Coke beat EPS and revenue estimates in the preceding quarter, but the stock was down in response on soft guidance.
Caterpillar (NYSE:CAT – Free Report ) – Caterpillar is another major company reporting before the market’s open on Tuesday April 25th, with the mining and construction equipment maker expected to earn $0.62 per share on $9.36 billion in revenues, representing year-over-year declines of -7.8% and -1.1%, respectively. Estimates have been trending up in recent days, with the current $0.62 per share estimate up from $0.53 per share a month back. Driving estimates higher is the expectation of an improving demand outlook for construction equipment on dissipating oil and gas industry headwinds and hopes of Trump infrastructure spending. The stock hasn’t done much despite this improving earnings picture; it has lagged the Zacks Industrial Products sector and the S&P 500 index this year – the stock is up +1.5% in the year-to-date period vs. +4.1% for the sector and +5.2% for the S&P 500 index. This stock market performance puts the spotlight on this earnings report, with management’s outlook for the end-markets as the key catalyst.
DuPont (NYSE:DD – Free Report ) and 3M (NYSE: MMM – Free Report ) are some of the other major companies reporting results on Tuesday April 25th.
Procter & Gamble (NYSE:PG – Free Report ) – Procter & Gamble is one of the major companies reporting results before the market’s open on Wednesday April 26th when a total of 50 index members will be coming out with quarterly reports (of which 27 will come out in the morning). The company is expected report $0.94 per share on $15.68 billion in revenues, representing year-over-year changes of +8.8% and -0.5%, respectively. The revisions trend has been positive, though the Zacks EPS estimate for the quarter hasn’t moved up by much in recent days. The stock has modestly done better than the S&P 500 index in the year-to-date period (+6% vs. +5.2%), though it has lagged the Zacks Consumer Staples sector (+7%). Management’s guidance about organic growth and trends in the men’s razors/blades market where it faces tough competition from Harry’s and Dollar Shave Club.
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Coca-Cola Company (The) (NYSE:KO): Free Stock Analysis Report
E.I. du Pont de Nemours and Company (DD): Free Stock Analysis Report
3M Company (NYSE:MMM): Free Stock Analysis Report
Procter & Gamble Company (The) (NYSE:PG): Free Stock Analysis Report
Caterpillar, Inc. (CAT): Free Stock Analysis Report
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