Washington Spotlight Clouds All Else - Earnings Preview
27 Setembro 2013 - 3:06AM
Zacks
Washington Spotlight Clouds All Else
Developments in Washington DC are in the spotlight, stealing the
limelight from a host of top-tier economic data and a steady
trickle of 2013 Q3 earnings reports. Reporting season has gotten
underway and 17 S&P 500 companies already come out with
results, as of Friday September 27, 2013. This week brings earnings
reports from 20 companies, including 4 S&P 500 members.
Walgreens (WAG), Monsanto (MON), and Constellation Brands (STZ) are
some of the notable companies reporting results this week.
We have had a few strong earnings reports already, particularly
from Nike (NKE), FedEx (FDX), and AutoZone (AZO), but the overall
trend at this admittedly very early stage is mixed. The market
isn’t paying much attention to the Q3 earnings season at this stage
as all the focus is on handicapping the odds of a government
shutdown and, more importantly, the debt ceiling issue. The day of
reckoning on the budget/shutdown issue is upon us, though we still
likely have a couple of more weeks before the debt ceiling will
positively need to be raised. Needless to say that this DC
spotlight isn’t market friendly as it heightens the real or
perceived risks to the economy.
Low Expectations for Q3
As has been the case at the start of recent quarterly earnings
cycles, expectations for the Q3 earnings season have fallen sharply
over the last three months. Total earnings for companies in the
S&P 500 are now expected to be up only +1.1% from the same
period last year, down from +1.2% last week and +5.1% at the start
of the quarter in early July, as the chart below shows.
This negative revisions behavior is hardly unusual as we have been
repeatedly seeing this pattern play out in recent quarters.
Companies have been overwhelmingly guiding lower, prompting
analysts to cut estimates for the following quarter. The revisions
behavior ahead of the Q2 earnings season was no different and most
of the same sectors have experienced negative revisions this time
around as well. The ‘regulars’ on the negative estimate revisions
beat include Technology, Basic Materials, and Industrials. But in
addition to those sectors, Retail and Consumer Discretionary have
played material roles in bringing down expectations for Q3 as
well.
The chart below compares the Q3 total earnings growth expected for
these five sectors at the start of the quarter and where those
expectations stand at present
Estimates for other sectors have come down as well, with even
the Finance sector earnings expected to be up +6.2% now vs. the
+8.1% that was expected in early July. Energy, Utilities,
Conglomerates and even Construction have suffered negative
revisions in varying degrees.
High Expectations for Q4
While estimates for Q3 have come down, the same for Q4 and the
following quarters have held up fairly well, as the chart below
shows.
Part of the extremely strong growth expected in Q4 is a function
of easier comparisons, as 2012 Q4 represents the lowest quarterly
earnings total for the S&P 500 in the last six quarters, with
the comps particularly easy for the Finance sector. But it’s not
all due to easy comparisons, as the expected earnings totals for Q4
represent a new all-time quarterly record. Total earnings for the
S&P 500 reached a new record at $256.5 billion in Q2,
surpassing Q1’s $254.1 billion record. But they are expected to
reach $273.5 billion in 2013 Q4, with total earnings growth outside
of Finance expected at +8.5%.
Judging by what has happened over the past year or so, these Q4
estimates will come down as companies share their outlooks on the
Q3 earnings calls. The market didn’t care much as estimates came
down in the last few quarters, hoping for better times ahead. Will
it do the same this time as well, pushing its hopes of earnings
ramp up into 2014? We will find out the answer to that question
over the next two months.
The Washington Drama
Headlines from Washington DC will be all the rage this week, but we
have a full docket of top-tier economic data coming out this week
as well. Most of recent economic data, like Jobless Claims, New
Home sales, and Personal Income/Spending has been good enough to
allow the Fed to start the Taper process. But perhaps the Fed was
justifiably wary of going that route in the last meeting given the
coming budget/debt ceiling battles in Congress.
The most important report coming out this week is the September
non-farm payroll report coming out on Friday. We will also get the
two ISM surveys, the private sector jobs tally from ADP and other
economic readings this week.
Monday - 9/30
- The Chicago PMI coming out after the market opens will give us
a preview of the national manufacturing ISM survey on Tuesday. The
expectation is for the Chicago PMI to modestly lose ground from
August’s 55.7 reading.
- Paychex (PAYX) is the only notable earnings release today,
coming out after the close.
Tuesday - 10/1
- We will get the September manufacturing ISM index, August
Construction Spending, and September motor vehicle sales numbers
coming out.
- The expectation is for the ISM reading to modestly pullback
from August’s 55.7 level, while Construction Spending is expected
to show a +0.6% increase after July’s similar gain.
- Walgreen’s (WAG) is the key earnings report in the morning,
while Global Payments (GPN) will report after the close.
- Zacks Earnings ESP, our proprietary leading indicator of
earnings surprises, is showing Global Payments to come out with a
positive earnings surprise.
- For More details on Earnings ESP, check the ESP page here.
Wednesday - 10/2
- We will get the September private sector jobs report from
payroll processor Automatic Data Processing (ADP) in the morning,
with expectations of 175K jobs in September, essentially unchanged
from August’s 176K tally.
- Monsanto (MON) is the only notable earnings report coming out
today.
Thursday - 10/3
- Jobless Claims and the service-sector ISM survey are on the
economic docket.
- Constellation Brands (STZ) and International Speedway (ISCA)
are the only major earnings reports today.
Friday - 10/4
- The key economic report today is the September non-farm payroll
report from the government’s Bureau of Labor Statistics (BLS). The
consensus expectation is for ‘headline’ job gains of 180K vs. 169K
in August.
- No major earnings report coming out today.
Here is a list of the 20 companies reporting this week,
including 4 S&P 500 members:
Company |
Ticker |
Current Qtr |
Year-Ago Qtr |
Last EPS Surprise % |
Report Day |
Time |
OMNOVA SOLUTION |
OMN |
0.22 |
0.16 |
14.29 |
Monday |
BTO |
PARK ELECTROCHE |
PKE |
0.3 |
0.28 |
-13.79 |
Monday |
BTO |
PAYCHEX INC |
PAYX |
0.43 |
0.42 |
2.7 |
Monday |
AMC |
DIAMOND FOODS |
DMND |
-0.01 |
0.02 |
131.25 |
Monday |
AMC |
PALATIN TECH |
PTN |
-0.04 |
-0.14 |
33.33 |
Monday |
AMC |
WALGREEN CO |
WAG |
0.73 |
0.53 |
-5.56 |
Tuesday |
BTO |
ACUITY BRANDS |
AYI |
1.02 |
0.88 |
7.78 |
Tuesday |
BTO |
ACTUANT CORP |
ATU |
0.5 |
0.55 |
-1.59 |
Tuesday |
BTO |
GLOBAL PAYMENTS |
GPN |
0.94 |
0.87 |
-3.92 |
Tuesday |
AMC |
TEAM INC |
TISI |
0.36 |
0.36 |
0 |
Tuesday |
AMC |
RESOURCES CNCTN |
RECN |
0.11 |
0.12 |
6.67 |
Tuesday |
AMC |
SYNERGETICS USA |
SURG |
0.05 |
0.08 |
66.67 |
Tuesday |
AMC |
MONSANTO CO-NEW |
MON |
-0.43 |
-0.44 |
3.75 |
Wednesday |
BTO |
TEXAS INDS |
TXI |
0.05 |
-0.09 |
116 |
Wednesday |
AMC |
CALAMP CORP |
CAMP |
0.15 |
0.14 |
16.67 |
Wednesday |
AMC |
NATL AMER UNIV |
NAUH |
-0.01 |
-0.01 |
-28.57 |
Wednesday |
AMC |
RADIANT LOGIST |
RLGT |
0.02 |
0.01 |
100 |
Wednesday |
N/A |
CONSTELLATN BRD |
STZ |
0.89 |
0.71 |
-7.32 |
Thursday |
BTO |
INTL SPEEDWAY |
ISCA |
0.01 |
0.01 |
0 |
Thursday |
BTO |
XYRATEX LTD |
XRTX |
-0.01 |
0.34 |
230 |
Thursday |
AMC |
AUTOMATIC DATA (ADP): Free Stock Analysis Report
AUTOZONE INC (AZO): Free Stock Analysis Report
FEDEX CORP (FDX): Free Stock Analysis Report
GLOBAL PAYMENTS (GPN): Free Stock Analysis Report
INTL SPEEDWAY (ISCA): Free Stock Analysis Report
MONSANTO CO-NEW (MON): Free Stock Analysis Report
NIKE INC-B (NKE): Free Stock Analysis Report
PAYCHEX INC (PAYX): Free Stock Analysis Report
CONSTELLATN BRD (STZ): Free Stock Analysis Report
WALGREEN CO (WAG): Free Stock Analysis Report
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