Zacks Earnings Preview: Alcoa, Oracle, FedEx, Nike and Wells Fargo
CHICAGO, Jan. 7, 2013
CHICAGO, Jan. 7, 2013 /PRNewswire/ --Zacks.com releases the list of companies
likely to issue earnings surprises. This week's list includes Alcoa (NYSE:AA),
Oracle (Nasdaq:ORCL), FedEx (NYSE:FDX), Nike (NYSE:NKE) and Wells Fargo
To see more earnings analysis, visit http://at.zacks.com/?id=3207.
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Q4 Earnings Expectations Keep Coming Down
Aluminum producer Alcoa's (NYSE:AA) earnings report is generally considered
the start of each quarterly earnings cycle. And by that measure, the fourth
quarter earnings season will get underway with Alcoa's report after the close
on Tuesday. In total, we will get earnings reports from 34 companies this
week, including 5 S&P 500 members, with the reporting pace accelerating in the
Alcoa's unofficial first-to-report status notwithstanding, the fourth quarter
reporting has been officially underway for a couple of weeks now as all
companies with financial quarters ending in November and reporting results in
December get counted as part of our fourth quarter results tally. As such, we
already have fourth quarter results from 22 S&P 500 companies, including
operators like Oracle (Nasdaq:ORCL), FedEx (NYSE:FDX) and Nike (NYSE:NKE).
Total earnings for these 22 companies are up +1.4% from the same period last
year, with total revenues up +3.5%. This is better performance than what this
same cohort of 22 companies did in the third quarter when total earnings were
down -2.4% from the year-earlier period.
At this stage, the important story on the earnings front is what's expected
for the more than 95% that have still to report results. And those
expectations have been steadily coming down over the last three months and are
barely in positive territory now. Total earnings in the fourth quarter are
expected to be up +0.4% from the same period last year. This is a sharp drop
from the roughly +7% earnings growth rate that consensus expected just three
The downward adjustment to expectations notwithstanding, fourth quarter
earnings growth is still better than what was expected in the third quarter
just before the start of that reporting cycle. At this stage in the third
quarter, total earnings were expected to be down more than -3% from the same
period last year.
Actual results, however, came out a little better with total third quarter
earnings essentially flat. Excluding Finance, total earnings in the third
quarter were down -4.1%, while total ex-Finance revenues are expected to be
down -1.3% in the fourth quarter.
Wells Fargo (NYSE:WFC) will kick off the big bank earnings season with its
release before the market's open on Friday. Wells Fargo has been a relatively
steady performer in the big-bank space lately, with positive earnings
surprises in each of the last four quarters. The Finance sector as a whole is
expected to have earnings growth of 9.8% in the fourth quarter, which will be
a deceleration from the sector's strong growth pace in the last few quarters
(Finance sector earnings were up +23.3% in the third quarter).
Construction has the best earnings growth profile of all 16 Zacks sectors,
with total earnings for the sector expected to increase +33.3% from the same
period last year. Business Services is the only other sector that is expected
to have a double-digit earnings growth in the fourth quarter, up +11.5%.
Overall, ten of the 16 Zacks sectors will have negative earnings growth, with
even the Tech sector experiencing earnings decline of -3.5% (Tech sector
earnings were barely in the positive column in the preceding quarter).
We don't have much on the economic calendar this week, which should help focus
the market's attention on the underwhelming earnings picture. Even more so
than in prior quarters, the key element earnings season will be management
guidance for the following quarter(s).
The reason for the significance of guidance this time around is the
lofty-looking expectations for 2013. Even as earnings expectations for the
fourth quarter came down over the last few months, we haven't seen much
downward adjustment to estimates for 2013, which still shows growth rate of
close to +10%.
Sheraz Mian is the Director of Research for Zacks.com.
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Contact: Sheraz Mian
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