The following research was contributed to by Christine Short, VP of Research at Wall Street Horizon.
- S&P 500 EPS growth for Q3 is set to come in at 2.2%, unchanged in the last two weeks, and still at the lowest level since Q3 2020
- This week 15 S&P 500 companies are expected to report results, many from the consumer discretionary sector.
- Potential surprise: Salesforce (CRM)
The final act of Q3 earnings season is upon us, the time when we begin to hear from US retailers. Next week big names in the space, such as Wal-Mart, Target, TJX Companies, Home Depot and Lowe’s release results that will show how the third quarter performed which includes back-to-school shopping, and will give investors an idea of how the holiday shopping season is faring. Also expect to hear comments about the impact of inflation, which perhaps will turn more positive given Friday’s better-than-expected CPI report which showed that the inflationary environment may be easing.
With 91% of companies reporting at this point, S&P 500 EPS growth for the quarter remains at 2.2%, unchanged in the last two weeks. This is a 0.5 percentage point decrease from where expectations stood on Sept 30, and marks the lowest growth rate in two years. (Data from FactSet).
Forward looking estimates are also being revised downward, with Q4 expectations turning more negative in the last week, now anticipated to report a YoY decline of 1.7%. Calendar year 2023 estimates still remain inflated at 5.8%, but that number has started to fall (from 8.1% on September 30) as analysts downgrade due to the strong dollar, economic slowdown and the fall of some big tech names. That number still seems way too high, and will likely continue to fall as we get into the new year.
The Retail Parade Kicks Off this Week
This week we get Q3 results from 15 S&P 500 companies, a number of them from the consumer discretionary and tech sector. Big names to watch include: Wal-Mart (WMT), The Home Depot (HD), NVIDIA (NVDA), Target (TGT), Lowe’s (LOW), The TJX Companies (TJX), Palo Alto Networks (PANW), Macy’s (M), Ross Stores (ROST), Gap (GPS), and Foot Locker (FL).
A Big Tech Name is Late to Confirm Its Q3 Earnings Date
When a company fails to confirm their earnings date around the same time that they have historically, it often positively correlates with a delayed report which then signals bad news is coming on the earnings call. The Confirmed Date Factor captures to what extent the newly confirmed earnings date conforms to a company’s history or represents a significant outlier, whether notably earlier or later dates than past behavior. Wall Street Horizon findings show there is valuable information to be gained by analyzing Confirmation Timing events and has seen that firms reporting earlier than usual exhibit positive abnormal returns. Likewise, companies that confirm later than average typically exhibit negative abnormal returns.
Currently Salesforce is uncharacteristically late in confirming their earnings report date for the third quarter. In recent years CRM has confirmed their Q3 earnings date around November 3, with a standard deviation of +/- 4.5 days. At the time of writing (Friday, November 11) CRM was 8 days past their mean confirmation day.
Like other names in the tech space, Salesforce is dealing with tougher business conditions that include higher prices and interest rates, as well as the possibility of a recession next year. In response to these headwinds, CRM let go of nearly 1,000 employees on Monday. That move was welcomed by investors who took the stock ~13% higher last week. These cost cuts won’t be reflected in the Q3 report which is expected to show profits were negative YoY for the fifth consecutive quarter, and that revenue growth fell to its lowest level in over 15 years.
Q3 2022 Earnings Wave – Peak Season Continues
This week 1,130 companies anticipated to report (out of our universe of 9,000 global names). Thus far 88% of companies have confirmed their earnings date and 76% have reported.
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Wall Street Horizon provides institutional traders and investors with the most accurate and comprehensive forward-looking event data. Covering 9,000 companies worldwide, we offer more than 40 corporate event types via a range of delivery options from machine-readable files to API solutions to streaming feeds. By keeping clients apprised of critical market-moving events and event revisions, our data empowers financial professionals to take advantage of or avoid the ensuing volatility.
Christine Short, VP of Research at Wall Street Horizon, is focused on publishing research on Wall Street Horizon event data covering 9,000 global equities in the marketplace. Over the past 15 years in the financial data industry, her research has been widely featured in financial news outlets including regular appearances on networks such as CNBC and Fox to talk corporate earnings and the economy.
The author may hold positions in mentioned securities. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.