By Wallace Witkowski, MarketWatch
Results snap back from steep forecast cuts
Earnings estimates appear to have been lowballed more than usual
this season, as what looked to be the first quarterly
year-over-year decline in a few years is shaping up to be a slight
gain.
Stocks ended the week mostly higher
(http://www.marketwatch.com/story/us-stocks-a-cautious-move-higher-as-big-jobs-data-looms-2015-05-08)
following Friday's strong jobs report with the Dow Jones Industrial
Average (DJI) advancing 0.9%, the S&P 500 index (SPX) rising
0.4%, and the Nasdaq Composite Index (RIXF) declining less than
0.1%.
For the S&P 500, blended earnings--meaning, earnings results
of companies that have already reported combined with estimates of
those companies that haven't reported yet--crept into the black
this past week, showing 0.1% growth for the first quarter,
according to John Butters, senior earnings analyst at FactSet, a
far cry from the expected 4.7% year-over-year decline that was
forecast on March 31.
That makes for a larger-than-average swing, seeing earnings
growth, on average, tends to end up about 2 to 3 percentage points
higher than expected.
As energy prices tumbled over the first quarter, so did analyst
estimates, making for a larger-than-average lowballing of corporate
results. Analyst estimates went from a forecast 4.3% growth as the
first quarter began, down to that expected 4.7% decline over the
course of the quarter.
The sharp decline in expectations stoked concerns of an
"earnings recession," where earnings decline year-over-year for at
least two consecutive quarters. That concern, however, remains
somewhat viable for the rest of the year as analysts expect a 4.3%
decline in earnings for the second quarter, a 0.5% decline in the
third quarter, and flat earnings for the fourth, according to
FactSet's Butters.
Still, even if first-quarter earnings growth holds at 0.1%, it
will still be the worst quarter since the third quarter of 2012,
when S&P 500 earnings declined 1%. About nine-tenths of the
S&P 500 has already reported results this season.
A mixed bag of sectors report this week with an emphasis on
health care, tech, and retailers. Only 14 S&P 500 companies
report this week including Cisco Systems Inc. (CSCO), Actavis
PLC(ACT), McKesson Corp.(MCK), Macy's Inc. (M), and Nordstrom
Inc.(JWN)
The following week, larger cap retailers like Wal-Mart, Target,
and Home Depot will report.
Notable earnings reports this week
Report date Company/Ticker (FactSet EPS / revenue estimate)
Mon., May 11 Actavis ($3.94 / $4 billion)Sotheby's US:BID (break-even / $151.7 million) Dish Network Corp. US:DISH (40 cents / $3.73 billion)
Tues., May 12 McKesson ($2.74 / $45.04 billion)International Flavors & Fragrances Inc. US:IFF ($1.43 / $767.9 million) GoDaddy Inc. US:GDDY (22 cents / $370.3 million)Zillow Group Inc. US:Z (loss of 11 cents / $127.8 million)
Weds., May 13 Cisco (53 cents / $12.07 billion)Macy's (62 cents / $6.32 billion)Ralph Lauren Corp. US:RL ($1.32 / $1.88 billion)J.C. Penney Co. US:JCP (loss of 80 cents / $2.86 billion)Shake Shack Inc. US:SHAK (loss of 3 cents / $34 million)
Thurs., May 14 Nordstrom (71 cents / $3.17 billion)Kohl's Corp. US:KSS (54 cents / $4.18 billion)Symantec Corp. US:SYMC (44 cents / $1.56 billion)Applied Materials Inc. US:AMAT (28 cents / $2.4 billion)
Fri., May 15 nothing of note
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