With nearly all the companies in the S&P 500 reported actual earnings for the first quarter, and growth looks to be close to nil. That’s usually scaring investors because stock prices tend to follow the path of corporate profits over the long term.
With 92% of the companies in the S&P 500 reporting actual results, more than three quarters posted a positive EPS surprise and 59% have posted a positive revenue surprise. The blended earnings decline is 0.5%, pointing out that the current reporting season is the worst since Q2 2016.
However, the digits are welcomed by the traders when the expectation was for something much worse. Coming into this earnings reporting season, Wall Street was forecasting a drop of roughly 4% in S&P 500 earnings per share. Investors never want to see a sustained decline in earnings, particularly not when the economy is this deep into an expansion.
Six sectors are reporting year-over-year growth in earnings, led by the Health Care, while on the flipside are five, led by Energy, Information Technology, and Communication Services. The Health Care sector is reporting the highest (year-over-year) earnings growth of all eleven sectors at 9.2%.
Remarkable financial reports during the quarter were Pioneer Natural Resources Co and Fifth Third Bancorp, which are companies with the highest positive revenue surprises. The two large-cap companies beat market expectations with 38% and 32%, respectively. The stocks of the companies are strong into the green year-to-date, despite recent turmoils.
Last week was not much busy with financial reports, but key events on the market were the earnings statements of the American department store chain Macy’s, the networking hardware company Cisco Systems.
Now, investors are looking at how strong earnings growth will be in the later parts of 2019, and Wall Street is getting less pessimistic. After slashing their profit forecasts for S&P 500 companies for months, analysts no longer see things getting so dire.
Macy’s first-quarter earnings top analysts’ expectations
the American department store chain Macy’s reported first-quarter earnings and same-store sales that topped analysts’ expectations, as its initiatives to refresh outdated stores and get more people to shop using its mobile app showed signs of paying off.
But its sales still fell from a year ago, as the department store chain continues to face many of the same challenges impacting all retailers today. It’s not easy to draw people to the mall to buy clothes when they could just shop on online at Amazon, or from platforms like Stitch Fix and Rent the Runway.
Macy’s also reaffirmed its previously issued financial outlook for the full year. The company said it sees same-store sales rising by 1% for the full year, with flat net revenues and diluted earnings per share in the region of 3.05-3.25 USD, supported by about 0.25 USD per share in asset sale gains.
The company posted earnings per share (EPS) of 0.44 USD in Q1 2019, down 8.3% from the same period last year, but beating market expectations for 0.33 USD. The revenue of the store chain fell slightly below forecasts to 5.504 billion USD, but the same-store sales rose by 0.7%.
CEO Jeff Gennette said e-commerce revenues grew at a double-digit percentage rate during the quarter, while mobile remained Macy’s fastest-growing channel for sales growth.
However, the timing of Easter, which fell later in the season this year than last, hurt sales, as did the colder, wetter weather that has blanketed much of the country this spring, he said.
Cisco Systems beat markets expectations
Cisco Systems delivered third-quarter fiscal 2019 non-GAAP earnings of 0.78 USD per share which beat the analysts’ estimates slightly. Further, the figure rose 18.2% from the year-ago quarter.
The company’s revenues increased 6% year over year, excluding Service Provider Video Software Solutions (SPVSS) to 12.958 billion USD. The acquisitions contributed 40 bps to the top line in the reported quarter.
Strength witnessed in the company’s Security and Applications segments drove year-over-year growth. Order strength and improving the traction of the subscription-based model were other tailwinds.
Notably, during the second quarter of fiscal 2019, the company completed the divestiture of its SPVSS business.
Products (75% of total revenues) advanced by 7% to 9.72 billion USD.
Services (25% of total revenues) increased by 3% to 3.24 billion USD, driven by growth in software and solutions services.
Revenues from subscriptions represent 65% of the company’s software revenues, up 9 points year over year.