CHICAGO, Nov. 18, 2013 /PRNewswire/ -- Zacks.com releases the list of companies likely to issue earnings surprises. This week's list includes Target (NYSE:TGT-Free Report), Gap (NYSE:GPS-Free Report), Home Depot (NYSE:HD-Free Report), Wal-Mart (NYSE:WMT-Free Report) and Amazon (Nasdaq:AMZN-Free Report).
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The Last Earnings Trickle In
The bulk of the Q3 earnings season is now behind us, with results from 463 S&P 500 members, or 92.6% of the index's total membership, already known. There are still plenty of reports to come, particularly from the Retail sector, with Target (NYSE:TGT-Free Report), Gap (NYSE:GPS-Free Report) and Home Depot (NYSE:HD-Free Report) on deck for releases this week. Including these retailers and companies from other sectors, we will get reports from more than 89 companies this week, including 26 S&P 500 members. By the end of this week, we will have seen Q3 results from 489 of the S&P 500 members.
Our overall verdict on the Q3 earnings season is favorable, particularly relative to the last few quarters. That actual results have been better relative to the lowered pre-season expectations is no surprise given management team's impressive track record in under-promising and over-delivering. There is still not much growth and most companies are still guiding lower, prompting estimates for Q4 to come down. But whatever little growth we have in Q3 thus far is better than we have seen in recent quarters. And for those keeping records, the Q3 earnings season appears on track a new quarterly record for total earnings, surpassing the level achieved in Q2.
The Retail focus this week has taken added significance given the broadly underwhelming outlook for the holiday season that emerged fromWal-Mart (NYSE:WMT-Free Report). It will be interesting to see if Target will further validate what we heard from Wal-Mart, but consumer spending growth did decelerate in Q3. We saw in the recent Q3 GDP report that personal consumption expenditures were up only +1.5%, down from Q2's +1.8% growth pace. A low-growth environment forces retailers to rely on promotional efforts to grab more consumer dollars. But this zero-sum drive for market share where one company's gain is another's loss typically drives down margins for everyone.
Looked at this way, Wal-Mart's sub-par outlook may not solely be a function of under-pressured household finances, but also reflective of a hyper competitive retail environment where some operators like Amazon (Nasdaq:AMZN-Free Report) are more than willing to sacrifice margins for more sales. Wal-Mart referred to this competitive dynamic in their earnings call, which apparently more than offset the beneficial effects of recent downtrend in gasoline prices.
Q3 Earnings Scorecard (as of Friday, 11/15/2013)
Total earnings for the 463 S&P 500 companies that have reported results are up +4.9% with 65.4% beating earnings expectations, while total revenues for these companies are up +3.0% and 43.4% are beating top-line expectations.
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