EC The Market's Earnings Uncertainty

Earnings growth is expected to be in double digits for 8 of the 16 Zacks sectors, with Energy (+65.5% growth), Finance (+21.1%), Construction (+26.2%) and Transportation (+22.8%) has the strongest growth. Tech sector earnings are expected to decelerate meaningfully in Q4, up +6.2%, after back-to-back quarters of very strong growth. The Tech sector’s growth pace will likely come down some more in the coming days as analysts adjusts their estimates lower following the aforementioned Apple pre-announcement. 

Three sectors are expected to have lower earnings in Q4 relative to the year-earlier period, namely Conglomerates (-13.1% decline), Autos (-13.8%), and Utilities (-6.8%).

The table below shows the summary picture for Q4, contrasted with what was actually achieved in the preceding earnings season.

The chart below shows Q4 earnings and revenue growth expectations contrasted with what is expected in the following three quarters and actual results in the preceding 4 quarters. As you can see in the chart below, the growth pace is expected to decelerate materially from what we saw in the first three quarters of the year.

The chart below shows the same data on a rolling 4-quarter basis

Whether we look at the growth picture on a quarterly basis or on a rolling quarter basis, there is no doubt that growth peak is now behind us. The question now is how much estimates for the coming quarters have still to come down. And the answer to that question will depend on the evolving economic backdrop that we discussed at the start.

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Note: Sheraz Mian manages the Zacks equity research department. He is an acknowledged earnings expert whose commentaries and analyses appear on Zacks.com and in the print and electronic media. ...

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