EC Q4 2020 Earnings Season Preview

 

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The overall earnings picture started improving in early July as big parts of the U.S. economy have started coming out of the pandemic-driven lockdown. We saw this improvement in the revisions trend, with earnings estimates steadily going up. Earnings growth in Q3 was still negative, but the decline was significantly smaller relative to what we had seen in Q2, which turned out to be the bottom.

This favorable revisions trend appears to have leveled off to some extent in recent weeks, likely reflecting the moderating effect of the fall and winter infection surge that has been showing up in recent economic readings. But with the vaccination exercise already underway and expected to gather pace in 2021, it is reasonable to envision the economic and earnings pictures resuming the earlier positive trend.

The consensus expectation is for total S&P 500 earnings to decline -11% in Q4 from the same period last year on essentially flat revenues. This would follow the -7% decline in Q3 and -32.2% decline in Q2 when economic and business activities came to a halt as a result of the pandemic driven lockdowns.

The chart below shows how 2020 Q4 estimates have evolved over the last few months.

The Q4 earnings season will really get going when the big banks come out with results on January 15th. The wide majority of companies have fiscal quarters that correspond with the calendar quarters, which is December 31st for Q4.

But there are almost two dozen S&P 500 members that have fiscal quarters that ended in November and 9 such companies, including FedEx (FDX) and Oracle (ORCL) have reported their fiscal November-quarter results recent days. We and other data aggregators club the results from these 9 index members as part of the Q4 tally. We have another three S&P 500 members on deck to report fiscal November-quarter results this week, including Cintas (CTAS), CarMax (KMX) and Paycheck (PAYX).

Looked at this way, we will have counted almost two dozen such Q4 results before JPMorgan (JPM) reports its quarterly results on January 15th.

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William K. 4 weeks ago Member's comment

Interesting here. The amazing thing that I see is how losses are defined. If some CEO estimated that profits will be 400Mn abd instead they are 380 Mn that does not mean that they LOST 20Mn, but rather that the estimate that was intended to make shareholders happy was a bit off. Why all te weeping and wailing when profit growth slows a bit, considering that it is still profit, not a loss? It seems like far too much is all a fog of overcharged emotions running rampant in the stocks market area. How would Mister Spock handle the information?