Now for some bad news for US third quarter earnings from some of the country’s struggling retailers.
After a couple of weeks of stunning results from big tech stocks and fair to middling results from other sectors, it will be the turn of some of ‘Amazon’s victims’ as one analyst terms them to reveal their figures.
Just 50 companies on the S&P 500 index are due to report results. Besides the retailers, the remaining big media groups will report by Friday. The biggest, Wal-Mart is due to report later in the month (November 16).
At centre stage though, reports from department stores and chains such as Macy’s, Nordstrom, JC Penny’s, Lowes Cos, Dillard’s, CVS and Kohl’s. Hormel Foods (Spam) and Campbell Soup Co also report and will likely show the negative impact of the changing consumer spending preferences consumers in food and staples. Coach, the luxury products chain is also down to report.
Investors will be watching guidance from these groups for the holiday quarter with most retailers struggling to meet the challenge from Amazon and its online rivals (which include the likes of Wal-Mart). Falling mall traffic from rising online competitors, intense discounting and changing consumer spending preference are damaging sales and profit margins.
Media groups, 21st Century Fox, News Corp, Time inc, Dish Network, some of the Liberty Media companies associated with billionaire, John Malone and Walt Disney report, along with drug company, Mylan and Equifax, the US credit reporting company at the heart of a cyber security scandal.
Earnings per share the S&P 500 companies are on track to rise 8% over the third quarter last year, according to Thomson Reuters, led by big gains in the energy and at the technology giants (and including the weak returns from insurers). But that is a sharp slowing from the 15% and 12% growth rates posted in the first two quarters of the year.
Excluding the energy sector, which is still recovering from a painful contraction, S&P 500 earnings are expected to rise 5.6% for the quarter— well below a median of about 8% since 2011, Thomson Reuters data show. Estimates reflect actual results for the 80% or so of companies that have reported earnings and analyst estimates for the rest.
The insurance industry dragged on results in the third quarter as significant claims from three major hurricanes pushed profits down 61% (as we saw last week with AIG and the big losses in Berkshire Hathaway’s insurance group which cut third quarter earnings overall for Warren Buffett’s company). Excluding insurers, S&P 500 earnings are expected to rise 10.8%.
Revenues are expected to rise 5.2%, the second-best showing in six years and handily outpacing a median increase of 3.6% since the height of the financial crisis, Thomson Reuters’ data showed.
“The revenue numbers we are seeing now are stronger than we have seen going back to 2011 or 2012,” John Butters, senior earnings analyst at FactSet said on Friday. FacSet said at the weekend that 81% of the companies in the S&P 500 have reported actual results for the third quarter of 2017.
"In terms of earnings, more companies (74%) are reporting actual EPS above estimates compared to the five-year average. In aggregate, companies are reporting earnings that are 4.8% above the estimates, which is also above the five-year average.
"In terms of sales, more companies (66%) are reporting actual sales above estimates compared to the five-year average. In aggregate, companies are reporting sales that are 1.2% above estimates, which is also above the five-year average,“ FactSet.
