For Immediate Release

Chicago, IL – November 10, 2014 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Wal-Mart (WMT-Free Report), Macy’s (M-Free Report), Nordstrom (JWN-Free Report) and Cisco (CSCO-Free Report).

To see more earnings analysis, visit http://at.zacks.com/?id=3207.

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Q3 Earnings Season Winding Down

With Q3 results from only 11% of the S&P 500 members still awaited, as of Friday November 7th, the bulk of the earnings season is now behind us. The earnings season has come to an end for 4 of the 16 Zacks sectors, with results from all of the remaining sectors, except Retail, also for the most part on the books already.

The Retail sector is the only one where roughly half of the sector’s companies have yet to report Q3 results. The sector is heavily on this week’s reporting docket, with leaders like Wal-Mart (WMT-Free Report), Macy’s (M-Free Report) and Nordstrom (JWN-Free Report) reporting results. In total, we will have results from more than 400 companies this week, including 14 S&P 500 members.

Our grade for this earnings season remains ‘average’ – it isn’t good, but it isn’t bad either. To explain our ‘average’ grade, we share two types of charts below that will show how the results thus far compare with the past and what is happening to estimates for the current period (2014 Q4).

The two side-by-side charts below compare the results thus far with what we had seen from the same group of S&P 500 members in Q2 and other preceding quarters (the 4-quarter Average is the four quarters through 2014 Q2).

It’s hard to make one all-encompassing narrative for the reporting cycle, other than to say that it’s not materially different from what we have been seeing from these companies in other recent quarters, particularly on the growth front. Beat ratios appear to be diverging from the norm a bit – with Q3 earnings beats ratios tracking above recent levels while revenue beat rates are on the weak side.

One could argue that this isn’t a bad performance and we are harsh in giving this reporting cycle an ‘average’ grade. That’s a fair comment, but our grade also reflects how the results thus far, particularly management guidance, are impacting estimates for the current period (2014 Q4).

This negative revision trend isn’t new either – we have been seeing this quarter after quarter for more than two years now. In some respects, the pace and magnitude of the negative revisions at this stage is exceeding what we had been seeing at comparable stages in the last few quarters.

The Q3 Scorecard (as of November 7th)

We have seen Q3 results from 447 S&P 500 members that combined to account for 90.5% of the index’s total market capitalization. Total earnings for these companies are up 6.7% from the same period last year, with 71.6% of the companies beating earnings estimates. Total revenues are up 4.0% and 57.9% have come ahead of top-line estimates.

The earnings growth rate for 7 of the 16 Zack’s Sectors is in double digits, with Construction (+17.9%), Basic Materials (+ 17.6%), and Medical (+15.4%), having the strongest growth rates. The Materials strength isn’t a reflection of increased demand for this economically sensitive sector in these troubled times, but relatively easier comparisons for the Chemicals industry (the largest industry in the sector) and Steel industries. Total earnings for the Chemicals industry, which alone accounts for roughly two-thirds of the Basic Materials sector’s total earnings, are up +23.8% on +4.5% higher revenues.

On the flip side, we have just one sector with negative signs on the growth front, Autos down -21.6%. We know that the automakers were struggling with product recalls and the Retail sector still has plenty of reports to come. The hope is that the falling gasoline prices will help the sector this holiday season, though recent commentary from Wal-Mart doesn’t bear that out.

Mixed Tech Results

The Tech sector where we have seen results from 89.8% of the sectors market cap has been a relative laggard. Total earnings for the 55 Tech sector companies (out of 65 in the S&P 500 index) are up 6% on 7.9% higher revenues, with 70.9% beating EPS estimates and 63.6% coming ahead of top-line estimates. The beat ratios for the sector were tracking below historic levels earlier in the reporting cycle, but are now tracking above recent historic levels on the earnings front and a bit below on the revenue side.

The Composite Picture

Total earnings for the S&P 500 reached an all-time quarterly record in 2014 Q2 and current estimates for Q3 put the quarterly total as the second highest ever. We don’t have that many reports left now, but a few big surprises from the likes of Cisco (CSCO-Free Report), Wal-Mart and a handful of other still to come reports could put the Q3 total right there with what we saw in Q2.

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