Here is a quick rundown of the key points of retail’s Q1 earnings.
• We have Q1 results from 463 S&P 500 members or 92.6% of the index’s total membership. Total earnings for these companies are up +13.4% from the same period last year on +7.3% higher revenues, with 72.6% beating EPS estimates and 65.9% beating revenue estimates.
• These results represent a notable improvement over what we have been seeing from the same group of 463 index members in other recent past. Not only is the growth pace (both earnings as well as revenues) tracking above other recent periods, but the proportion of companies beating estimates, particularly revenue estimates, is notably tracking above other recent periods.
• With the positive Wal-Mart (WMT) report now in, we have Q1 results from 71.4% of the retailers in the S&P 500 index. Total Q1 earnings for the Retail sector are up +1.4% from the same period last year on +2.9% higher revenues, with 63.3% beating EPS estimates and 53.3% beating revenue estimates. The sector’s Q1 results are tracking below what we have been seeing in other recent periods and are also among the weakest this reporting cycle.
• For Q1 as a whole, combining the actual results from the 463 S&P 500 members that have reported with estimates from the still-to-come 37 companies, total earnings are expected to be up +12.9% on +6.2% higher revenues, the highest growth pace in over five years. The Finance, Technology, Industrial Products, Consumer Discretionary, Basic Materials, and Business Services sectors stand out with double-digit earnings growth.
• Estimates for the current period (2017 Q2) have come down since the start of the quarter, but the magnitude of negative revisions nevertheless compares favorably to other recent periods.
With even the Retail sector results now mostly out, the Q1 earnings season is now effectively behind us. Our overall take on this earnings season has been favorable, with growth reaching its highest level in more than 5 years, an above-average proportion of companies beating EPS and revenue estimates, and relatively encouraging trends in estimate revisions for the current period. This reassuring view doesn’t extend to the Retail sector, whose results have been fairly weak.
