The Q3 earnings season is in its latter half with a high proportion of companies having already unveiled their quarterly financial numbers.
The picture that has emanated so far is an extremely healthy one and the Q3 earnings season remains on track to end on a strong note by displaying substantial growth. Markedly, many companies have reported better-than-expected earnings per share in the current reporting cycle.
In fact, the impressive scenario with respect to earnings outperformance is reflected by the latest Earnings Preview. Per the report, approximately 75.7% of the S&P 500 members have outperformed on the bottom-line front.
Despite the well-documented headwinds plaguing the highly-diversified Zacks Transportation sector (one of the 16 Zacks sectors), quite a few sector participants like American Airlines Group (AAL – Free Report) and Norfolk Southern Corp. (NSC – Free Report) have reported better-than-expected earnings per share in Q3.
Lowered Bar Facilitates Earnings Beats
We suspect that the reason for the high proportion of transportation companies reporting better-than-expected Q3 earnings despite the headwinds lies in the conservative nature of the Zacks Consensus Estimate.
Notably, earnings estimates have been moving south for quite some time due to the challenges confronting this sector.
In this context, let’s consider the case of American Airlines. The Zacks Consensus Estimate third-quarter 2017 for the carrier was pegged at $1.39, much lower than the year-ago figure of $1.68. The conservative nature of the Zacks Consensus Estimate has made it easier for transportation companies to surpass them in the quarter.
Zacks Methodology to the Rescue
Even though a high proportion of transportation players have already revealed their quarterly numbers, quite a few players are yet to announce their results. As has been the case so far in Q3, quite a few of them will outperform with respect to the bottom-line despite the overall challenges confronting the sector.