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Oracle, FedEx, Nike, Costco and JPMorgan are part of Zacks Earnings Preview

Oracle, FedEx, Nike, Costco and JPMorgan are part of Zacks Earnings Preview

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This story originally appeared on Zacks

For Immediate Release

Chicago, IL – September 20, 2021 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Oracle Corporation ORCL, FedEx Corporation FDX, NIKE, Inc. NKE, Costco Wholesale Corporation COST and JPMorgan Chase & Co. JPM.

- Zacks

The Start of Q3 Earnings Season

Recent economic readings have been mixed at best, causing estimates for Q3 GDP growth to come down materially in recent weeks. Unlike Q3 GDP growth estimates, earnings expectations for the period have not been revised lower, but the revisions trend has nevertheless lost its earlier momentum.

What we see here is that while the trend remains positive, it seems to have stalled out since late July. In fact, the magnitude of positive revisions to Q3 estimates is notably below what we had seen in the comparable periods of the last three earnings seasons.

This loss of momentum is likely tied to the emerging economic slowdown, which in turn is likely a function of the Delta variant. As mentioned earlier, estimates of GDP growth have been steadily coming down and currently stand around +3%, roughly half of the growth rate expected a few months back.

We also need to keep an eye on the margins outlook given rising cost trends in labor, inputs, freight/logistics and other line items.

The market appears to agree with the Fed’s assessment of this trend as ‘transitory’ and a function of Covid-related disruptions that will eventually even out. This view is reflected in current consensus estimates.

This ‘transitory’ view of the ongoing cost pressures is even more pronounced in the annual view of the margins picture.

We all know that the ‘transitory’ or otherwise debate has implications for Fed policy, which is as important for the market as the outlook for earnings and margins.

Expectations for Q3 & Beyond

The last earnings season (2021 Q2) not only witnessed a very high earnings growth rate, but the aggregate tally of total earnings also reached a new all-time quarterly record, surpassing the record set in the preceding period. Other positives that came out of the Q2 earnings season included the breadth of strength across all the key sectors and the notable momentum on the revenue front.

We know that the unusually high growth rates of the first two quarters will not continue in the last two quarters as they largely reflected easy comparisons to the year-earlier periods that were severely impacted by Covid-related disruptions. Comparisons will be relatively normal in 2021 Q3 and beyond as the U.S. economy had started opening up in the year-earlier period, hence the expected deceleration in the growth pace.

We mentioned earlier how the aggregate 2021 Q2 earnings tally represented a new all-time quarterly record.

We all know that large segments of the economy, particularly in the broader leisure, travel and hospitality spaces are held down by the pandemic, with companies in these areas still earning significantly less than they did in the pre-Covid period. In fact, many of these companies aren’t expected to get back to pre-Covid profitability levels for almost one more year.

The impressive feature of the record earnings in each of the last two quarters is that they were achieved without help from these key parts of the economy.

Earnings Season Gets Underway

Last week’s Oracle report was officially the first earnings release of the Q3 earnings season. Oracle reported results for its fiscal quarter ending in August, which we count as part of our Q3 earnings tally.

The reporting cycle notably ramps up this week, with 9 such S&P 500 members with fiscal quarters ending in August reporting results. These include bellwethers like FedEx, Nike, Costco and others, who will also be releasing their fiscal August quarter results this week.

By the time JPMorgan and other big banks start rereporting their September-quarter results on October 13th, we will have seen such August-quarter results from almost two dozen S&P 500 members.

For a detailed look at the overall earnings picture, including expectations for the coming periods, please check out our weekly Earnings Trends report >>>>Earnings Estimates Have Stopped Going Up

 

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JPMorgan Chase & Co. (JPM): Free Stock Analysis Report

 

NIKE, Inc. (NKE): Free Stock Analysis Report

 

Oracle Corporation (ORCL): Free Stock Analysis Report

 

Costco Wholesale Corporation (COST): Free Stock Analysis Report

 

FedEx Corporation (FDX): Free Stock Analysis Report

 

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