Timeout From Q3 Earnings: GDP +2.9%

Friday, October 28, 2016

Taking a break for a moment from the Q3 earnings deluge — which continues, and will remain heavy next week and beyond — to report on our first read of Q3 Gross Domestic Product (GDP). At 2.9%, we are seeing a snap-back from below-trend growth earlier in the year, heating up higher than expectations. This is the highest read on GDP in two years.

Analysts had been starting to look at 3% growth in 2016 as something of a pipe dream lately, with the final read on Q2 GDP at a relatively paltry 1.4%. In fact, core GDP quarter over quarter is actually down from Q2 — 1.7% versus 1.8% last time.

So what accounts for this upswing? Exports are +10%. As economies in both developing and developed nations gain sounder footing, demand for U.S. products has grown, even with a stronger dollar in play. Where we see negative numbers are in things like equipment (-2.7%), which appears to have been affected by persistently low oil prices.

As a result, we see the 10-year bond yield inching upward to 1.8% — still way below historic averages, but higher than the 1.7% it had been stuck at all summer. As we continue to see economic metrics strengthening, we will keep our eye on things like the 10-year a bit more closely.

Q3 Earnings Plod Along

Exxon Mobil (NYSE:XOM) posted mixed Q3 earnings results — 63 cents per share beat the 60 cents we had expected, though revenues of $58.68 billion in the quarter was light the $60.56 billion in the Zacks consensus. The company’s barrels of oil equivalent produced per day was down 2.7%.

AutoNation (NYSE:AN) also missed top-line expectations, and came in 10 cents light on the bottom line, as well. $1.05 per share marks the second negative earnings surprise in the past four quarters. Takeda airbag problems that have hit the company’s supply chain persist.

Humira manufacturer AbbVie (NYSE:ABBV) just met earnings estimates of $1.21 per share while falling short of the $6.55 billion in sales, reporting $6.43 billion. The company did tighten its full-year earnings guidance to $4.80-4.82 per share.

Has anyone outperformed this morning? Sure — Mastercard (NYSE:MA) put up $1.08 per share, outpacing the 98 cents expected. Sales of $2.9 billion in the quarter topped the $2.74 billion in the Zacks consensus estimate.

Mark Vickery
Senior Editor

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