{"id":8011,"date":"2019-04-29T16:39:12","date_gmt":"2019-04-29T16:39:12","guid":{"rendered":"https:\/\/zackspcg.com\/blog\/?p=8011"},"modified":"2022-02-26T13:07:19","modified_gmt":"2022-02-26T13:07:19","slug":"what-q1-earnings-tell-us-about-the-year-to-come","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/what-q1-earnings-tell-us-about-the-year-to-come\/","title":{"rendered":"What Q1 earnings tell us about the year to come"},"content":{"rendered":"\n<p class=\"has-medium-font-size\"><strong>The Heartbeat of the\nStock Market: Earnings <\/strong><\/p>\n\n\n\n<p>There are a myriad of factors\ninfluencing market movements right now: trade issues with China, the Federal\nReserve\u2019s new approach to monetary policy, Brexit uncertainties, new\nappointments to the Fed, and so on down the line. But I would argue that no\nfactor contributes more to the long-term direction of domestic stock prices\nthan U.S. corporate earnings. <\/p>\n\n\n\n<p>Q1 2019 earnings are hitting\nthe tape daily, so this week I\u2019ll give readers a synopsis of what we know to\ndate and what I think we can expect looking ahead.<\/p>\n\n\n\n<p>As of the end of last week (April 18), 77 S&amp;P 500\nmembers had reported earnings results, and the numbers were far from inspiring:\n+0.2% earnings growth on +2.5% higher revenues. The same 77 companies grew\nearnings +13.9% on +5.4% in the previous quarter, creating a contrast that easily\nhas raised some eyebrows.<sup>1<\/sup> <\/p>\n\n\n\n<p>As I\u2019ve stated before, I\nbelieve the key in terms of the market\u2019s movement relative to economic and\nearnings data is not necessarily whether the outlook is positive or negative,\nbut rather, <em>whether the earnings\nexpectations already being priced into the market are met<\/em> <em>or exceeded.<\/em><\/p>\n\n\n\n<p>_______________________________________________________________________<\/p>\n\n\n\n<p><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2019_4_28&amp;content=stock_market_outlook_report\">Time to Focus on Fundamentals!<\/a><\/strong><\/p>\n\n\n\n<p>Now more\nthan ever, I think it is best to stick to hard data and keep an eye on economic\nindicators as opposed to making emotional, knee-jerk reactions. To help you do\nthis, we are offering all readers a first look into our just-released May 2019\nStock Market Outlook report.<\/p>\n\n\n\n<p>This\nreport gives you our forecasts along with additional factors to consider:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Will the\nbullish market continue\u2026and for how long? <\/li><li>Zacks\nglobal markets\u2019 outlook<\/li><li>What\nsectors show the best opportunity?<\/li><li>What\nindustries within those sectors should you focus on?<\/li><li>Forecast\nfor the S&amp;P<\/li><li>Small-cap\nvs. large-cap returns<\/li><li>\u2026And much\nmore<\/li><\/ul>\n\n\n\n<p>If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!<br> \u00a0<br> <strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2019_4_28&amp;content=stock_market_outlook_report\">IT&#8217;S FREE. Download the Just-Released Stock Market Outlook<\/a><sup><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2019_4_28&amp;content=stock_market_outlook_report\">2<\/a><\/sup><\/strong><\/p>\n\n\n\n<p>_______________________________________________________________________<\/p>\n\n\n\n<p>Thinking\nwithin this framework, the earnings results so far in Q1 don\u2019t look so bad. Of\nthe 77 reporting companies, 79.2% have beaten earnings-per-share (EPS)\nestimates and 54.5% have beaten revenue estimates. The comparison charts below\nput this performance in historical context for these 77 index members. As you\ncan see, EPS beats are nicely in-line with averages, while revenues are a bit\non the low side.<sup>3<\/sup><\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/2019-04-25-MOTM-Image-1-of-1.jpg\" alt=\"\" class=\"wp-image-8012\"\/><\/figure>\n\n\n\n<p>Driving the expected Q1 earnings decline are\nbroad-based margin pressures across all major sectors, with net margins for companies\nin the S&amp;P 500 sitting at 11.1%, down from 12% a year earlier and 11.8% in\nthe preceding quarter. The Utilities sector is the only sector expected to have\nunchanged net margins in Q1 2019 relative to the year-earlier period, with\nmargins expected to be lower for all of the remaining 15 sectors.<\/p>\n\n\n\n<p>Looking at Q1 as a whole, combining the\nactual results that have come out from the 77 S&amp;P 500 members with\nestimates for the still-to-come companies, total earnings for the quarter are\nexpected to be down -3.2% from the same period last year on +4.6% higher\nrevenues. If actual 2019 Q1 earnings growth turns out to be negative, it will\nbe the first earnings decline since the second quarter of 2016.<sup>4<\/sup><\/p>\n\n\n\n<p>The market appears to be looking at this growth picture as\na function of tough comparisons following the tax-cut boost to corporate profitability\nin 2018 \u2013 which is also arguably why we haven\u2019t seen much market response to\nthe weak earnings picture. This view is paired with one where growth ramps up\nin the second half of the year and accelerates into next\nyear, with full-year 2020 earnings growth for the index expected to reach\ndouble digits following tepid +2% expected growth in 2019.<\/p>\n\n\n\n<p>The counter narrative is that we have reached\nthe end of the economic cycle when growth inevitably turns south. Macroeconomic\ndata doesn\u2019t support this narrative currently, and while I acknowledge the\nweakness in Europe, the outlook for the U.S. economy continues to be positive,\nwith growth modestly below the preceding year\u2019s level \u2013 but still very stable.\nOther key regions of the world, particularly China, are also showing signs of\n\u2018green shoots.\u2019<\/p>\n\n\n\n<p><strong>Bottom\nLine for Investors <\/strong><\/p>\n\n\n\n<p>Expectations for Q2 2019 and the following quarters will\nevolve as companies report Q1 results and provide commentary about ground-level\nbusiness conditions. We will be keeping a close eye on this revisions trend.\nLooking ahead, total Q2 earnings for the S&amp;P 500 index\nare expected to be down -0.3% from the same period last year on +4.9% higher\nrevenues,<sup>5<\/sup> which seems like bad news \u2013 but when one notes that the\npace and magnitude of negative revisions to Q2 estimates are lower than what we\nhad been seeing at the comparable period in the preceding quarters, it\u2019s not so\nbad after all. Again, the central question for investors should consistently\nbe: What are the earnings expectations versus the earnings realities?<\/p>\n\n\n\n<p>To help you get the answer to this question and many more, we are offering all readers a first-look into our just-released <strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2019_4_28&amp;content=stock_market_outlook_report\">Stock Market Outlook report.<\/a><\/strong><br> \u00a0<br> This report will provide you with our forecasts along with additional factors to consider:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><em>Will the bullish market\ncontinue\u2026and for how long? <\/em><\/li><li><em>Zacks global markets\u2019\noutlook<\/em><\/li><li><em>What sectors show the best\nopportunity?<\/em><\/li><li><em>What industries within\nthose sectors should you focus on?<\/em><\/li><li><em>Forecast for the S&amp;P<\/em><\/li><li><em>Small-cap vs. large-cap\nreturns<\/em><\/li><li><em>\u2026And much more<\/em><\/li><\/ul>\n\n\n\n<p>If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!<sup>6<\/sup><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Heartbeat of the Stock Market: Earnings There are a myriad of factors influencing market movements right now: trade issues [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":7430,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[63,71],"tags":[],"class_list":["post-8011","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitch-on-the-markets","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8011","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=8011"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8011\/revisions"}],"predecessor-version":[{"id":10765,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8011\/revisions\/10765"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=8011"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=8011"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=8011"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}