CHICAGO, Feb. 18, 2014 /PRNewswire/ -- Zacks.com releases the list of companies likely to issue earnings surprises. This week's list includes Wal-Mart (NYSE:WMT-Free Report), Bank of America (NYSE:BAC-Free Report), Verizon (NYSE:VZ-Free Report) and Travelers (NYSE:TRV-Free Report).
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Q4 Earnings Season Winding Down
The Q4 earnings season isn't over yet, with almost 400 companies releasing results this week, including 41 S&P 500 members. But the bulk of the reporting season is now behind us, giving us a good enough sense of how good, or otherwise this reporting season has been.
We are sticking with our overall take that the Q4 earnings season has been good enough; it has certainly been no worse than other recent quarters. In fact, this earnings season is better than recent quarters in terms of earnings growth and positive surprises, both EPS and revenue surprises. Where it's no different from other recent quarters is in terms of lackluster top-line growth and continued negative guidance.
In other words, we didn't see any improvement on the guidance front, which has been weak for more than a year now. And this is prompting estimates for the current quarter to come down.
With companies in the retail sector starting to report fourth quarter results in greater numbers this week and beyond, we will likely see even more negative guidance. They don't even need to try very hard to explain their dire straits - they can safely blame everything on the weather. Wal-Mart (NYSE:WMT-Free Report) which reports on Thursday had already pre-announced its Q4 problems, but we will likely see a lot more negative guidance from other retailers in the coming days. Total earnings for the sector are expected to be down -4.6% in Q4, which is a material downgrade from the +1.1% growth expected at the start of the reporting season.
Q4 Earnings Scorecard (as of Friday, 2/14/2014)
Total earnings for the 401 S&P 500 members that have reported already, combined accounting for 86.2% of the index's total market capitalization, are up +11.1% from the same period last year, with a 'beat ratio' of 68.6% and a median surprise of +2.4%. Total revenues are barely in the positive column, up only +0.8%, with a revenue 'beat ratio' of 61.1% and a median surprise of +0.8%.
More companies have beat earnings and revenue expectations than has been the case in recent quarters, as the chart below shows. Perhaps expectations had fallen a bit low ahead of the Q4 reporting season.
The earnings growth rate for these 401 companies is better than what we saw from this same group of companies in Q3 and the 4-quarer average. A big contributor to the strong Q4 earnings growth is easy comparisons for three companies -Bank of America (NYSE:BAC-Free Report), Verizon (NYSE:VZ-Free Report), and Travelers (NYSE:TRV-Free Report). Exclude these three companies and total earnings growth for the S&P 500 companies that have reported drops to +6.9% from the 'headline' +11.1%, which is about where growth has been in recent quarters.
The revenue growth rate is notably weak, but that's primarily because of the Finance and Energy sectors.
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