Nike, Micron, JPMorgan, Wells Fargo and Costco are part of Zacks Earnings Preview

For Immediate Release

Chicago, IL – March 23,2020 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Nike NKE, Micron MU, JPMorgan JPM, Wells Fargo WFC and Costco COST.

The Market's Worst Days Are Behind Us

With the S&P 500 index historically losing about a third of its value in response to recessions, it is reasonable to expect that the bulk of the pullback is behind us at this stage.

Over this 15-year period, the index has traded as high as 19.3X (November 2017), as low as 10.6X (September 2011), and a 15-year median of 15X. In other words, we are trading below the 15-year median. The downturn has squeezed the market multiple by roughly -26% at this stage.

We got into this downturn not because of a structural problem in the U.S. economy, but rather because of an exogenous shock (the virus outbreak). I strongly believe that the market will find its collective footing only after it gains greater confidence and visibility on the underlying driver, meaning the outbreak.

And since there are no easy or quick fixes on the virus front, at least through the next four to six weeks, it is reasonable to expect the market to sputter around current levels, with a bias to the downside as the outbreak moves towards its peak and we digest ominous headlines about the outbreak’s human and economic toll.

That said, the bulk of the sell-off is likely behind us and the best investment strategy for those with a longer holding horizon, beyond the next one to two years, is to start accumulating small positions in quality blue-chip names that are now available at 20% to 30% discounts relative to where they traded 5 or 6 weeks ago.

I am not suggesting that you jump in all the way today, but rather start taking small positions while still preserving sufficient capital for opportunities that are bound to show up in the coming days. Don’t try to ‘time’ the market or look for catching the true bottom. That is an extremely difficult, if not altogether impossible, undertaking.

2020 Q1 Earnings Season Preview    

That’s when everyone in the market will start paying attention to the Q1 earnings season. Unfortunately for us, we don’t have the luxury to wait that long as we are responsible for maintaining the ‘books’ on every earnings season.

From our standpoint, the 2020 Q1 earnings season has actually gotten underway already. We now have results from 10 S&P 500 members so far.

The majority of companies use calendar quarters as their fiscal reporting periods. But as we all know, fiscal and calendar quarters don’t match for all companies, as is the case with Cintas, FedEx, Adobe, and others whose fiscal quarters ended in February. We club such fiscal February-quarter results as part of our March-quarter tally. It is in this context that the 2020 Q1 earnings season has gotten underway for us already.

We have another 4 S&P 500 members with fiscal quarters ending in February on deck to report such 2019 Q1 results this week, which includes Nike and Micron. The fact is that by the time the JPMorgan and Wells Fargo come around to report their March-quarter results on April 14^th, we will have seen 2020 Q1 results from almost two dozen S&P 500 members already.

The Coronavirus Impact

Needless to say, this global pandemic is the biggest cloud on the earnings horizon, as it has such an overwhelming impact on the economic and operating environment in which these companies operate.

Each of the four index members that have reported already mentioned the virus outbreak in their releases, with Costco reporting a +12.1% same-store sales growth in February as nervous shoppers stocked up on essential supplies. But for most other companies, the pandemic has undoubtedly been a negative development whose full impact they are struggling to quantify.

The pace of estimate cuts has accelerated in recent days, with the magnitude of cuts to Q1 estimates now larger than any other recent comparable quarter.

Estimates for 2020 Q2 have been coming down as well and now remain in negative territory.

Consensus estimates show growth resuming in the back half of the year. But that view likely reflects the hope that the pandemic and its associated effects get under control in the coming months. Hard to tell at this stage as to how reasonable or otherwise this expectation.

The ongoing market sell-off shows there isn’t a lot of confidence in these consensus expectations. That will likely change only once visibility on containment of the pandemic improves, which will enable companies to get a handle on the full extent of their exposure and the pandemic’s macroeconomic impact.

For an in-depth look at the overall earnings picture and expectations for Q1, please check out our weekly Earnings Trends report >>>> The Earnings Uncertainty

Today's Best Stocks from Zacks

Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.

This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.

See their latest picks 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
 
JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report
 
NIKE, Inc. (NKE) : Free Stock Analysis Report
 
Micron Technology, Inc. (MU) : Free Stock Analysis Report
 
Costco Wholesale Corporation (COST) : Free Stock Analysis Report
 
Wells Fargo & Company (WFC) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research