AutoZone, Costco and Adobe are part of Zacks Earnings Preview

For Immediate Release

Chicago, IL – December 10, 2018 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes AutoZone AZO, Costco COST and Adobe ADBE.

Earnings Growth in a Slowing Economy

Earnings aren’t the market’s primary concern at present; the focus rather is on the evolving economic picture that is expected to decelerate from its recent pace. We are not seeing much evidence of this growth deceleration in recent economic data, the weaker than expected November jobs report notwithstanding, but the slowdown is expected to arrive over the coming months.

The market is hoping that the Fed takes note of this evolving growth expectation and adjusts its monetary policy stance accordingly. Fed officials’ public comments and media speculation suggest that the central bank may be leaning in that direction as well.

So what’s driving the slowdown? It’s a combination of factors, ranging from the fading of the tax reform’s impact and trade/tariff uncertainty to economic weakness abroad. While many in the market are starting to see the flattening yield curve and pockets of inversion as signs of something a lot more ominous on the horizon. The consensus view appears to be that the U.S. economy is putting the 2018 GDP growth pace of +3%-plus behind it, with the growth pace going forward in the +2%-plus range.

This isn’t an abstract discussion as the economy’s growth trajectory not only has implications for Fed policy, but also for consensus earnings expectations. Earnings estimates for 2018 Q4 and full-year 2019 have been coming down lately, but they likely have more to go down given the headwinds.

Q4 estimates have come down for 15 of the 16 Zacks sectors. The Transportation sector is the only one that has experienced positive estimate revisions, which is a reflection of the pullback in fuel expenses. Estimates have come down the most for the Conglomerates, Construction, Consumer Discretionary, Utilities and Basic Materials sectors.

This type of negative revisions is not unusual in historical terms, though they do represent greater estimate cuts than was the trend in the last few quarters.

Q4 Earnings Season Gets Underway

The Q4 earnings season will not take the spotlight at least until the middle of January, but the reporting season has officially gotten underway already, with the AutoZone report on December 4th as the first reporter of this earnings season. AutoZone, which handily beat EPS and revenue estimates, reported results for its fiscal quarter ending in November. Two more S&P 500 members, Costco and Adobe, will be releasing their November-quarter results this week and will get counted as part of the Q4 tally.

Total Q4 earnings are expected to be up +12.7% from the same period last year on +5.8% higher revenues, which would follow the +25.6% earnings growth on +8.4% higher revenues in 2018 Q3.

Earnings growth is expected to be in double digits for 6 of the 16 Zacks sectors, with Energy (+83.5% growth), Finance (+22.7%), Construction (+27%) and Transportation (+23.5%) has the strongest growth. Tech sector earnings are expected to decelerate meaningfully in Q4, up +6.9%, after back-to-back quarters of very strong growth.

Four sectors are expected to have lower earnings in Q4 relative to the year-earlier period, namely Conglomerates (-12.9% decline), Autos (-13.5%), Utilities (-6.4%) and Consumer Staples (-0.5%).

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.

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. His weekly earnings related articles include Earnings Trends and Earnings Preview.

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.

See Them Free>>

Join us on Facebook:  https://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Media Contact
Zacks Investment Research

800-767-3771 ext. 9339

support@zacks.com

https://www.zacks.com

Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

 

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
 
AutoZone, Inc. (AZO) : Free Stock Analysis Report
 
Adobe Systems Incorporated (ADBE) : Free Stock Analysis Report
 
Costco Wholesale Corporation (COST) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research