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Quarterly Wall Street reporting season is almost completed with 70% of companies having higher earnings

Wall Street reporting season

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Quarterly Wall Street reporting season is almost completed with over 96% of S&P 500 constituents have released their fourth-quarter earnings. Thus, 70% of them reported positive earnings with EPS expanded by 13.1% from the same period last year, extending the double-digit growth for the fifth straight quarter. However, this was also the first time that EPS growth fell short of 20% in one year.

On December 31, the estimated earnings growth rate for Q4 2018 was 12.1%, which may slightly return the optimism of investors. Seven sectors have higher growth rates today (compared to December 31) due to upward revisions to EPS estimates and positive EPS surprises.

For Q1 2019, 74 S&P 500 companies have issued negative EPS guidance and 26 &&P 500 companies have issued positive EPS guidance. During the first two months of the first quarter, analysts lowered earnings estimates for companies in the S&P 500 for the quarter. The Q1 bottom-up EPS estimate (which is an aggregation of the median EPS estimates of all the companies in the index) dropped by 6.5% (from 40.21% to 37.60 USD) during this period.

During the last week, there were several key financial statements, which were to close the reporting season. The retailers Target Corporation, Costco Wholesale, and Kohl’s posted their earnings reports, as well as the cloud computing company Salesforce.com Inc. All of them reported better-than-expected earnings and sales.

Target surpassed investors’ expectations

Target Corporation reported GAAP earnings per share (EPS) from continuing operations of 1.52 USD in the fourth quarter and 5.50 USD for full-year 2018, compared with 1.99 USD and 5.29 USD in 2017, respectively.

Fourth quarter Adjusted EPS were 1.53 USD and full-year Adjusted EPS were 5.39 USD, compared with 1.36 USD and 4.69 USD in 2017, respectively.

Comparable sales grew by 5.3% in the fourth quarter. The stores’ comparable sales grew by 2.9% in the fourth quarter, while comparable digital sales grew by 31%, contributing 2.4 percentage points to comparable sales growth. The total revenue of 23.0 billion USD was essentially flat to last year.

In Q1 2019, Target expects a low- to mid-single digit increase in comparable sales, and both GAAP EPS from continuing operations and Adjusted EPS of 1.32 USD to 1.52 USD.

For full-year 2019, Target expects a low- to mid-single digit increase in comparable sales and a mid-single digit increase in operating income. The Company expects both GAAP EPS from continuing operations and Adjusted EPS of 5.75 USD to 6.05 USD.

Costco sees earnings jump in second quarter

Earnings of Costco Wholesale jumped in the fiscal 2019 second quarter, climbing well over the upper end of Wall Street’s forecast. Costco said that reported net income for the quarter ended February 17 totalled 889 million USD, or 2.01 USD per diluted share, compared with 701 million USD, or 1.59 USD per diluted share, a year earlier.

The net sales for the quarter increased to 34.63 billion USD from 32.28 billion USD last year.

Total revenue for the quarter was 35.39 billion USD for the November 26 to February 17 quarter, higher than the 32.99 billion USD for Q2 last year. However, analysts predicted revenue of 35.65 billion USD for Q2.

Costco operates 770 warehouses, with 535 in the United States and Puerto Rico, 100 in Canada, 39 in Mexico, 28 in the United Kingdom, 26 in Japan, 15 in Korea, 13 in Taiwan, 10 in Australia, two in Spain, and one each in Iceland and France.