Handicapping The Q1 Earnings Season
Zacks Investment Research | Mar 23, 2018 06:38AM ET
Note: The following is an excerpt from this week’sWFC ) kick-off the earnings season on April 13th.
The most profound change on the earnings scene lately is the unusually positive revisions trend for Q1 and following quarters. The chart below shows how 2018 Q1 earnings growth expectations have evolved since mid-December 2017.
This is a sight that we haven’t seen in a very long time; definitely not in the last 6 years.
The most important factor driving this positive revisions trend is the tax cuts. The rise in oil prices and the impact of the uptrend in bond yields on banks’ profitability are some of the other factors.
Estimates have gone up across the board for 13 of the 16 Zacks sectors, with the highest percentage positive revisions for the Basic Materials, Energy, Industrials and Aerospace sectors. In absolute terms, the positive revisions to the Finance and Technology sectors account for more than half of all aggregate positive revision since mid-December 2017. For example, JPMorgan’s Q1 EPS estimate of $2.26 has gone up +16.5% over the past three months.
Expectations Beyond Q1
The chart below contrasts the Q4 earnings growth rate with what was actually achieved in the last 5 quarters and what is expected in the coming three periods.
It will be interesting to see if expectations for the following quarters will follow the positive revisions trend we witnessed ahead of the Q1 earnings season or we will go back to negative revisions trend that has been the recurring theme over the last many years.
Note: Sheraz Mian manages the Zacks equity research department. He is an acknowledged earnings expert whose commentaries and analyses appear on Zacks.com and in the print and electronic media. His weekly earnings related articles include Earnings Trends and Earnings Preview. He manages the subscribers.
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