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Globe and Mail
2 days ago
- Business
- Globe and Mail
Earnings Estimates Stabilize: A Closer Look
Note: The following is an excerpt from this week's Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>> Here are the key points: Total S&P 500 earnings for the June quarter are expected to be up +5.2% from the same period last year on +3.8% higher revenues, with a broader and greater pressure on estimates relative to other recent periods since the June-quarter got underway. Q2 earnings estimates for 14 of the 16 Zacks sectors have come down since the quarter got underway, with Aerospace and Utilities as the only sectors whose estimates have moved higher. Q2 earnings estimates for the Tech and Finance sectors, the two largest contributors to aggregate S&P 500 earnings, accounting for 51% of all index earnings, have also been cut since the quarter got underway. The quarter started with significant pressure on Tech sector estimates, but the negative revisions trend notably stabilized in the subsequent weeks. Q2 earnings for the 'Magnificent 7' group of companies are expected to be up +11.8% from the same period last year on +11.2% higher revenues. Excluding the 'Mag 7' contribution, Q2 earnings for the rest of the index would be up +3.4% (vs. +5.2%). The Q2 earnings season will really get going once JPMorgan and Wells Fargo kick-off the June-quarter reporting cycle for the Finance sector. But officially, the Q2 earnings season will have gotten underway much before that, as we and others count results from companies with fiscal quarters ending in May as part of the Q2 earnings season. Using that definition of Q2, we have already seen such results from Costco ( COST ), AutoZone ( AZO ), and Oracle ( ORCL ), and will have seen almost two dozen such results by the time the big banks report their results. Making Sense of Earnings Expectations for 2024 Q2 and Beyond The start of Q2 coincided with heightened tariff uncertainty following the punitive April 2 nd tariff announcements. While the onset of the announced levies was eventually delayed for three months, the issue has understandably weighed heavily on estimates for the current and coming quarters, particularly in the first few weeks after the April 2 nd announcement. The expectation at present is for Q2 earnings for the S&P 500 index to increase by +5.2% from the same period last year on +3.8% higher revenues. The chart below shows how Q2 earnings growth expectations have evolved since the start of the year. While it is not unusual for estimates to be adjusted lower, the magnitude and breadth of Q2 estimate cuts are greater than we have seen in the comparable periods of other recent quarters. Since the start of the quarter, estimates have come down for 14 of the 16 Zacks sectors, with the biggest declines for the Transportation, Autos, Energy, Construction, and Basic Materials sectors. The only sectors experiencing favorable revisions in this period are Aerospace and Utilities. Estimates for the two largest earnings contributors to the index – Tech & Finance – have also declined since the quarter began. Tech sector earnings are expected to be up +12% in Q2 on +10.5% higher revenues. While these earnings growth expectations are materially below where they stood at the start of April, the revisions trend appears to have notably stabilized lately, as we have been flagging in recent weeks. You can see this in the sector's revisions trend in the chart below. This stabilizing turn in the Tech sector's revisions trend can be seen in expectations for full-year 2025 as well, as the chart below shows. The two charts above show that estimates for the Tech sector have stabilized and are no longer under the type of downward pressure experienced earlier in the quarter. The Tech sector is much more than just any another sector, as it alone accounts for almost a third of all S&P 500 earnings. The Earnings Big Picture The chart below shows expectations for 2025 Q2 in terms of what was achieved in the preceding four periods and what is currently expected for the next three quarters. The chart below shows the overall earnings picture for the S&P 500 index on an annual basis. While estimates for this year have been under pressure lately, there haven't been a lot of changes to estimates for the next two years at this stage. Stocks have recouped their tariff-centric losses, although the issue has only been deferred for now. While some of the more dire economic projections have eased lately, there is still plenty of macro uncertainty that will likely continue to weigh on earnings estimates in the days ahead, particularly as we gain visibility on the tariffs question. Zacks' Research Chief Names "Stock Most Likely to Double" Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest. This top pick is a little-known satellite-based communications firm. Space is projected to become a trillion dollar industry, and this company's customer base is growing fast. Analysts have forecasted a major revenue breakout in 2025. Of course, all our elite picks aren't winners but this one could far surpass earlier Zacks' Stocks Set to Double like Hims & Hers Health, which shot up +209%. 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Globe and Mail
15-05-2025
- Business
- Globe and Mail
Making Sense of the Evolving Earnings Picture
Note: The following is an excerpt from this week's Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>> Here are the key points: Total Q1 earnings for the 456 S&P 500 members that have reported results are up +12.1% from the same period last year on +4.5% higher revenues, with 73.9% beating EPS estimates and 62.1% beating revenue estimates. We continue to believe that this earnings season was less about what companies earned in the first quarter of 2025 and more about sizing up the earnings impact of the evolving macroeconomic and public policy backdrop. To that end, management commentary has largely been reassuring despite the uncertainty. Estimates for the current period (2025 Q2) have been under pressure, with bigger declines in estimates compared to other recent post-COVID periods. That said, estimates for the Tech sector have notably stabilized lately. For 2025 Q2, total S&P 500 earnings are expected to be up +5.9% from the same period last year on +3.8% higher revenues. Q2 estimates have been steadily coming down, with the magnitude and breadth of negative estimate revisions greater than had been the case in the comparable periods of other recent quarters. What's Happening to 2025 Q2 Earnings Estimates? The start of Q2 coincided with heightened tariff uncertainty following the punitive April 2 nd tariff announcements. While the onset of the announced levies was eventually delayed for three months, the issue has understandably weighed heavily on estimates for the current and coming quarters. The expectation at present is for Q2 earnings for the S&P 500 index to increase by +5.9% from the same period last year on +3.8% higher revenues. The chart below shows how Q2 earnings growth expectations have evolved since the start of the year. While it is not unusual for estimates to be adjusted lower, the magnitude and breadth of the Q2 estimate cuts are greater than we have seen in the comparable periods of other recent quarters. Since the start of the quarter, estimates have come down for 13 of the 16 Zacks sectors, with the biggest declines for the Transportation, Autos, Energy, Construction, and Basic Materials sectors. Estimates for the two largest earnings contributors to the index – Tech & Finance – have declined since the quarter began. Tech sector earnings are expected to be up +12.4% in Q2 on +9.8% higher revenues. While these earnings growth expectations are materially below where they stood at the start of April, the revisions trend appears to have notably reversed course in recent weeks, as we have been flagging lately. You can see this reversal in the sector's revisions trend in the chart below. This favorable turn in the Tech sector's revisions trend can be seen in expectations for full-year 2025 as well, as the chart below shows. Hard to tell at this stage how durable this reversal in the Tech sector's estimates will prove to be, but the favorable turn in the sector's Q2 estimates at least proves that the shift to the annual growth pace isn't solely a function of strong positive Q1 earnings releases, particularly from the Mag 7 players. We can see this trend reversal in the estimates for Microsoft MSFT, Alphabet GOOGL, and Meta META. The current Q2 Zacks Consensus EPS estimate for Alphabet of $2.12 is down from $2.15 on April 4 th, but is up from $2.08 on April 25 th and $2.07 a week prior to that. Similarly, for Meta, the current Q2 EPS estimate of $5.84 is down from $5.94 on April 4 th, but up from $5.70 on May 2 nd and $5.51 on April 25 th. The revisions trend for Microsoft is similar, though the company's current Q2 estimate is modestly higher relative to where it stood at the start of April. You can rest assured that we will be closely monitoring the Tech sector's revisions trend in the days ahead. The Earnings Big Picture The chart below shows expectations for 2025 Q1 in terms of what was achieved in the preceding four periods and what is currently expected for the next three quarters. The chart below shows the overall earnings picture for the S&P 500 index on an annual basis. While estimates for this year have started coming down lately, there haven't been a lot of changes to estimates for the next two years at this stage. Given all-around worries about the economy's growth momentum, it is reasonable to expect these estimates to be lowered further in the days ahead as the tariffs impact starts showing up in data. The modestly negative GDP read for the first quarter of the year primarily reflected the anticipatory effects of the trade regime, with importers stocking up on supplies ahead of the new levies taking effect. Zacks' Research Chief Names "Stock Most Likely to Double" Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest. This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren't winners but this one could far surpass earlier Zacks' Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months. Free: See Our Top Stock And 4 Runners Up Want the latest recommendations from Zacks Investment Research? 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Globe and Mail
08-05-2025
- Business
- Globe and Mail
Tech Earnings Estimates Increase Again: What's Going On?
Note: The following is an excerpt from this week's Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>> Here are the key points: Total Q1 earnings for the 419 S&P 500 members that have reported results are up +12.2% from the same period last year on +4.1% higher revenues, with 73.7% beating EPS estimates and 61.8% beating revenue estimates. We continue to believe that this earnings season is less about what companies earned in the first quarter of 2025 and more about sizing up the earnings impact of the uncertain macroeconomic backdrop. This is starting to show up in declining estimates for the coming periods. For 2025 Q2, total S&P 500 earnings are expected to be up +6.4% from the same period last year on +3.9% higher revenues. Estimates for the period have been coming down more than had been the case in the comparable periods of other recent quarters. Q2 earnings estimates for the Tech sector appear to have reversed course over the last two weeks, with estimates starting to go back up after steadily coming down earlier. What's Happening to 2025 Q2 Earnings Estimates? The start of Q2 coincided with heightened tariffs uncertainty following the punitive April 2 nd tariff announcements. While the onset of the announced levies was eventually delayed for three months, the issue has understandably weighed heavily on estimates for the current and coming quarters. The expectation at present is for Q2 earnings for the S&P 500 index to increase by +6.4% from the same period last year on +3.9% higher revenues. The chart below shows how Q2 earnings growth expectations have evolved since the start of the year. While it is not unusual for estimates to be adjusted lower, the magnitude and breadth of the Q2 estimate cuts are greater than we have seen in the comparable periods of other recent quarters. Since the start of the quarter last month, estimates have come down for 13 of the 16 Zacks sectors, with the biggest declines for the Transportation, Autos, Energy, Construction, and Basic Materials sectors. Estimates for the two largest earnings contributors to the index – Tech & Finance – have also declined since the quarter got underway. Tech sector earnings are expected to be up +12.8% in Q2 on +9.9% higher revenues. While these earnings growth expectations are materially below where they stood at the start of April, the revisions trend appears to have notably reversed in recent days. You can see this reversal in the sector's revisions trend in the chart below. Image Source: Zacks Investment Research In last week's report, regular readers saw this reversal in the Tech sector's revisions trend when we shared the evolution of the sector's full-year earnings growth expectations. The updated version of that chart is reproduced here. Image Source: Zacks Investment Research Hard to tell at this stage how durable this reversal in the Tech sector's estimates will prove to be, but the favorable turn in the sector's Q2 estimates at least prove that the shift to the annual growth pace isn't solely a function of strong positive Q1 earnings releases, particularly the Mag 7 players that reported last week. We can see this trend reversal in the estimates for Microsoft MSFT, Alphabet GOOGL, and Meta META. The current Q2 Zacks Consensus EPS estimate for Alphabet of $2.12 is down from $2.15 on April 4 th, but is up from $2.08 on April 25 th and $2.07 a week prior to that. Similarly, for Meta, the current Q2 EPS estimate of $5.84 is down from $5.94 on April 4 th, but up from $5.70 on May 2 nd and $5.51 on April 25 th. The revisions trend for Microsoft is similar, though the company's current Q2 estimate is modestly higher relative to where it stood at the start of April. We will be closely monitoring this curious turn in Tech sector estimates. The Earnings Big Picture The chart below shows expectations for 2025 Q1 in terms of what was achieved in the preceding four periods and what is currently expected for the next three quarters. Image Source: Zacks Investment Research The chart below shows the overall earnings picture for the S&P 500 index on an annual basis. While estimates for this year have started coming down lately, there haven't been a lot of changes to estimates for the next two years at this stage. The chart below should give you a sense of how rapidly this year's estimates are getting adjusted lower. Image Source: Zacks Investment Research Given all-around worries about the economy's growth momentum, it is reasonable to expect these estimates to be lowered further in the days ahead as the tariffs impact starts showing up in data. The modestly negative GDP read for the first quarter of the year primarily reflected the anticipatory effects of the trade regime, with importers stocking up on supplies ahead of the new levies taking effect. 5 Stocks Set to Double Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%. Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor. Today, See These 5 Potential Home Runs >> Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Microsoft Corporation (MSFT): Free Stock Analysis Report Alphabet Inc. (GOOGL): Free Stock Analysis Report Meta Platforms, Inc. (META): Free Stock Analysis Report
