EC Previewing The Q1 2017 Earnings Season

We are still a couple of weeks away from the end of the March quarter, but the Q1 earnings season has gotten underway already. The four S&P 500 members that have reported results like Oracle (ORCL - Free Report) , Adobe Systems (ADBE - Free Report) and others have come out with their February fiscal quarter results, which form part of our Q1 earnings tally. We have another 8 index members reporting results this week, including bellwethers like FedEx (FDX - Free Report) , Nike (NKE -Free Report) , and Accenture (ACN - Free Report) and others.

The Oracle and Adobe reports have been very strong, with both companies showing plenty of momentum in their businesses, which likely helps frame earnings expectations for the Tech sector. This week’s report from Accenture should shed further light on this key sector, the strongest stock price performer in the year-to-date period.  


These early reports notwithstanding, the reporting cycle doesn’t take the spotlight till about mid-April, as the chart below of reporting calendar for the S&P 500 index clearly shows.

This Week’s Key Reports

FedEx reports after the market’s close on Tuesday, March 21, with the company expected to earn $2.65 per share on $14.98 billion in revenues, up +5.7% and +18% from the year-earlier level, respectively. The company missed expectations in the last earnings report on December 20th, which has weighed on the stock since then. The stock is down -2% since the last earnings report, underperforming the Zacks Transportation sector (up +1.3%) and the S&P 500 (up +4.8%). While FedEx’s surprise history has not been consistent, the stock always responds to the earnings report in a big way.

Nike reports the same day as FedEx after the market’s close on Tuesday, March 21. The company is expected to earn $0.52 per share on $8.45 billion in revenues, down -4.2% on +5.2% higher revenues from the year-earlier period, respectively. The stock responded positively to the last earnings report on December 20th, but has been a laggard over the past year (down -8.9%) relative to the Consumer Discretionary sector (up +13.8%) and the S&P 500 index (+16%). Competitive challenges from the likes of Under Armour and Adidas and the impact of problems in the retail chain on the company’s inventory situation have been the key issues in the Nike story. We should keep in mind, however, that while the Nike stock has been a laggard over the past year, Under Armour has been an even been bigger laggard.  

Accenture, the tech consulting firm, reports results before the market’s open on Thursday, March 23. The company is expected to earn $1.30 per share on $8.34 billion in revenues, down -3% on +5% higher revenues from the year-earlier period, respectively. The stock responds strongly to the earnings report – it was down in response to the last earnings report on December 21st but has done better than the S&P 500 index since the last earnings report. The key significance of the Accenture report is management’s commentary about technology spending trend, which offers read-throughs for IBM (IBM) and broader Technology space.

ConAgra (CAG - Free Report) , General Mills (GIS - Free Report) and Micron Technology (MU - Free Report) are some of the other notable reports this week.

Expectations for Q1

Total Q1 earnings are expected to be up +6.5% from the same period last year on +6.4% higher revenues. This would follow +7.3% earnings growth in 2016 Q4 on +4.7%, the highest growth pace in all most two years.

Estimates for Q1 came down as the quarter unfolded, with the current +6.5% growth down from +10.4% at the end of December. The chart below shows how Q1 earnings growth expectations have evolved over the last three months.

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Note: Sheraz Mian regularly provides earnings analysis on Zacks.com and appears frequently in the print and electronic media. In addition to this Earnings Preview ...

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