Zacks Earnings Trends Highlights: Amazon And Priceline

For Immediate Release

Chicago, IL – August 17, 2017 – Zacks Director of Research Sheraz Mian says, “With Q2 results from two-thirds of the Retail sector companies out, total earnings for the sector are up only +0.1% on +6.4% higher revenues, with 76.9% beating EPS estimates and a very strong 84.6% beating revenue estimates.”

The Retail Sector’s Mixed Q2 Showing

Note: The following is an excerpt from this week’s Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>

Here are the key points:
• With Q2 results from two-thirds of the Retail sector companies out at this stage, total earnings for the sector are up only +0.1% on +6.4% higher revenues, with 76.9% beating EPS estimates and a very strong 84.6% beating revenue estimates. This is a notably higher proportion of positive beats from the sector than has been the case historically.

• While the Retail sector has a sizable number of companies still to report Q2 results, the earnings season has come to an end for 10 of the 16 Zacks sectors, with results from only 38 S&P 500 index members still awaited at this stage. Total earnings for the 462 index members that have reported are up +10.7% from the same period last year on +5.8% higher revenues, with 74.5% beating EPS estimates and 68.3% beating revenue estimates.

• While growth is a bit on the lighter side relative to the preceding period for these 462 index members, the proportion of companies beating estimates, particularly revenue estimates, is notably tracking above other periods.

• For Q2 as a whole, combining the actual results with estimates for the still-to-come companies, total earnings are expected to be up +10.2% from the same period last year on +5.4% higher revenues. This would be the second quarter in a row of double-digit earnings growth performance for the S&P 500 index.

• The Q2 growth is broad-based and not concentrated in one or two sectors. The strongest growth is from the Energy, Transportation, Technology, Aerospace, Construction, Business Services, and Industrial Products sectors. Q2 earnings growth would fall to +8.5% on +4.8% higher revenues on an ex-Energy basis.

• Beyond Q2, total earnings for the S&P 500 index are currently expected to grow by +4% on +4.7% higher revenues in the September quarter and +8.7% on +5.6% higher revenues in Q4.

• Estimates for Q3 have come down, but they appear to be following the moderate revisions pace we saw ahead of the start of the Q2 earnings season. Estimates have fallen for 14 of the 16 Zacks sectors, with the Technology and Industrial Products sectors experiencing positive revisions.

• For full-year 2017, total earnings for the index are expected to be up +7.5% on +4.1% higher revenues, which would follow +0.8% earnings growth on +2.1% higher revenues in 2016. Index earnings are expected to be up +11.1% in 2018 and +8.9% in 2019.

Retail Sector Scorecard

The official Standard & Poor’s industry classification places the retail space in the Consumer Discretionary sector, but Zacks has a stand-alone economic sector for the industry that enables us to have a more granular view of developments in this space. The Zacks Retail sector includes, besides the traditional department stores and other brick-and-mortar operators, the online vendors like Amazon(NASDAQ: (NASDAQ:AMZN) – Free Report), Priceline(NASDAQ: (NASDAQ:PCLN) – Free Report) and restaurant operators. Results from the online vendors and the restaurant operators are already behind us at this stage.

For the Q2 earnings season, we have now have results from 26 of the 40 retailers in the S&P 500 index. Total earnings for the 26 retailers that have reported already are up +0.1% from the same period last year on +6.4% higher revenues, with 76.9% beating EPS estimates and 84.6% beating revenue estimates.

The proportion of retailers beating both EPS and revenue estimates is a very high 73.1%, the second highest of all 16 Zacks sectors.

A big proportion of retailers are beating estimates, both EPS and revenue estimates, at rates that are significantly above what we have been seeing from the same group of 26 retailers, but the Q2 earnings growth rate represents a deceleration from the historical trend.

A big reason for the sector’s weak earnings growth performance is Amazon’s results, whose Q2 earnings were down -77% on a year-over-year basis even as revenues were up +24.8%. Had it not been for the Amazon drag, total Q2 earnings for the Retail sector would be up +5.4%, which would be an improvement over what we have been seeing from the ex-Amazon group in other recent periods.

For the sector as a whole, combining the results that have come out with estimates for the still-to-come retailers, total earnings are on track to be modestly in negative territory (-0.4%) on +4.4% higher revenues.

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