January 19, 2018

This Week in Earnings 17Q4 | Jan. 19, 2018

by David Aurelio

Last Update: January 19, 2018

To download the full This Week in Earnings report click here.

Aggregate Estimates and Revisions

  • Fourth quarter earnings are expected to increase 12.4% from Q4 2016. Excluding the Energy sector, the earnings growth estimate declines to 9.9%.
  • Of the 53 companies in the S&P 500 that have reported earnings to date for Q4 2017, 79.2% have reported earnings above analyst expectations. This is above the long-term average of 64% and above the average over the past four quarters of 72%.
  • Fourth quarter revenue is expected to increase 7.1% from Q4 2016. Excluding the Energy sector, the revenue growth estimate declines to 5.9%.
  • 86.8% of companies have reported Q4 2017 revenue above analyst expectations. This is above the long-term average of 60% and above the average over the past four quarters of 63%.
  • For Q4 2017, there have been 70 negative EPS preannouncements issued by S&P 500 corporations compared to 45 positive, which results in an N/P ratio of 1.6 for the S&P 500 Index.
  • The forward four-quarter (1Q18 – 4Q18) P/E ratio for the S&P 500 is 18.4.
  • During the week of Jan. 22, 83 S&P 500 companies are expected to report quarterly earnings.

Exhibit 1: S&P 500 Y/Y Growth Rates

17Q4 Earnings Growth Highlights

The Energy sector has the highest earnings growth rate (140.0%) of any sector. It is expected to earn $12.4B in Q4 2017, compared to earnings of $5.2B in Q4 2016. All six sub-industries in the sector are anticipated to see higher earnings than a year ago. The Oil & Gas Exploration & Production (784.4%) and Oil & Gas Equipment & Services (398.8%) sub-industries have the highest EPS growth in the sector. If these sub-industries are removed, the growth rate declines to 82.0%.

The Materials sector has the second highest earnings growth rate (26.1%) of any sector. It is expected to earn $5.8B in Q4 2017, compared to earnings of $4.6B in Q4 2016. Ten of the 11 sub-industries in the sector are anticipated to see higher earnings than a year ago. The Copper (95.0%) and Fertilizers & Agricultural Chemicals (85.5%) sub-industries have the highest EPS growth in the sector. If these sub-industries are removed, the growth rate declines to 17.3%.

The Telecommunication Services sector has the lowest growth rate (-1.9%) of any sector. It is expected to earn $7.9B in Q4 2017, relative to earnings of $8.1B in Q4 2016. One of the 2 sub-industries in the sector are anticipated to see earnings decreases compared to Q4 2016, led by the Alternative Carriers (-38.5%). If this sub-industry is removed, the growth rate improves to 0.7%.

18Q1 Earnings Growth Highlights

First quarter earnings are expected to increase 16.0% from Q1 2017. Excluding the energy sector, the earnings growth estimate declines to 14.3%.

The Energy sector has the highest earnings growth rate (65.4%) of any sector. It is expected to earn $14.1B in Q1 2018, compared to earnings of $8.5B in Q1 2017. Five of the six sub-industries in the sector are anticipated to see higher earnings than a year ago. The Oil & Gas Exploration & Production (867.4%) and Oil & Gas Equipment & Services (269.2%) sub-industries have the highest EPS growth in the sector. If these sub-industries are removed, the growth rate declines to 31.4%.

The Materials sector has the second highest earnings growth rate (25.4%) of any sector. It is expected to earn $7.2B in Q1 2018, compared to earnings of $5.8B in Q1 2017. All 11 sub-industries in the sector are anticipated to see higher earnings than a year ago. The Copper (219.5%) and Paper Packaging (48.6%) and sub-industries have the highest EPS growth in the sector. If these sub-industries are removed, the growth rate declines to 14.1%.

The Telecommunications Services sector has the lowest growth rate (2.1%) of any sector. It is expected to earn $9.1B in Q1 2018, relative to earnings of $8.9B in Q1 2017. One of the two sub-industries in the sector is anticipated to see earnings decreases compared to Q1 2017, led by the Alternative Carriers (-38.5%) sub-industry. If this sub-industry is removed, the growth rate improves to 4.6%.

Exhibit 2: S&P 500: Estimate Revisions by Sector

Exhibit 3: S&P 500: Estimate Revision History

Source: Thomson Reuters I/B/E/S

Exhibit 4: All U.S. Companies: Estimate Revision History

Source: Thomson Reuters I/B/E/S

Please note: if you use our earnings data, please source Thomson Reuters I/B/E/S

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