For Immediate Release
Chicago, IL – March 15, 2019 – Zacks Director of Research Sheraz Mian says, “Total S&P 500 earnings are expected to decline -3.4% from the same period last year on +4.1% higher revenues. Growth is expected to be negative for 9 of the 16 Zacks sectors.”
First Earnings Decline in 3 Years
Note: The following is an excerpt from this week’s Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>
Here are the key points:
Earnings growth for the S&P 500 index is expected to turn negative in 2019 Q1, which will be the first earnings decline since 2016 Q2.
Total S&P 500 earnings are expected to decline -3.4% from the same period last year on +4.1% higher revenues. Growth is expected to be negative for 9 of the 16 Zacks sectors, with Technology and Energy as the biggest drags.
Technology sector earnings are expected to decline -9.5% from the same period last year on +2.9% higher revenues, with the semiconductor space as the biggest drag.
Estimates have been steadily coming down, both for Q1 as well as full-year 2019, with the magnitude of negative revisions one of the highest in recent years.
For the small-cap S&P 600 index, total Q1 earnings are expected to be down -5.5% from the same period last year on +4.1% higher revenues.
For full-year 2019, total earnings for the S&P 500 index are expected to be up +2.5% on +4% higher revenues, which would follow the +23% earnings growth on +8.6% higher revenues in 2018.
Estimates for 2019 have been steadily coming down, with the current +2.5% growth rate down from +9.8% in early October 2018.
The implied ‘EPS’ for the index, calculated using current 2019 P/E of 17.1X and index close, as of March 13th, is $163.93. Using the same methodology, the index ‘EPS’ works out to $181.17 for 2020 (P/E of 15.5X). The multiples for 2019 and 2019 have been calculated using the index’s total market cap and aggregate bottom-up earnings for each year.
We are still a few weeks away from big bank earnings results that now serve as the unofficial starting point of the reporting cycle since Alcoa relinquished that role following its split. Officially, however, the reporting cycle got underway with the Costco COST and AutoZone AZO reports.
Costco, AutoZone and a number of other major players on deck to report results in the next few days use fiscal quarters that end in February. All of these February-quarter reports get counted as part of our Q1 tally. We will have seen such Q1 results from almost two dozen S&P 500 members by the time JPMorgan JPM and Wells Fargo WFC kick-off the earnings season on April 12th.
Estimates for the period have been steadily coming down, as the chart below of Q1 earnings growth expectations show.
This is only an estimate at this stage and actual March-quarter earnings growth could very well be in positive territory. But it nevertheless shows that the growth picture will be a lot more challenged and problematic in the coming quarters.
The very strong growth we experienced in 2018 was primarily because of the tax cut legislation that was enacted towards the end of 2017. The pure arithmetic of the lower corporate tax rate represented a one-time boost to corporate bottom-lines that will be part of base comparisons for this year. On top of this comparability issue is the impact of slowing economic growth, particularly beyond the U.S. shores.
Recent revisions trend shows that these low growth expectations for the coming quarters still remain vulnerable to further downward revisions. In other words, it is reasonable for market participants to nurse some doubts about the current earnings backdrop.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, wouldn't you like to know about our 10 finest buy-and-holds for the year?
From more than 4,000 companies covered by the Zacks Rank, these 10 were picked by a process that consistently beats the market. Even during 2018 while the market dropped -5.2%, our Top 10s were up well into double-digits. And during bullish 2012 – 2017, they soared far above the market's +126.3%, reaching +181.9%.
This year, the portfolio features a player that thrives on volatility, an AI comer, and a dynamic tech company that helps doctors deliver better patient outcomes at lower costs.
See Stocks Today >>
Follow us on Twitter: https://twitter.com/zacksresearch
Join us on Facebook: https://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks Investment Research
800-767-3771 ext. 9339
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report
Wells Fargo & Company (WFC) : Free Stock Analysis Report
AutoZone, Inc. (AZO) : Free Stock Analysis Report
Costco Wholesale Corporation (COST) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research