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The profit season is here and estimates for the first quarter will drop dramatically from last year. The expectations for the second quarter are even worse.
The bad news is that those estimates can only continue to decline because some bank shares have already missed the results by a wide margin. It will put additional pressure on companies reporting results in the coming weeks to collapse or risk the profit outlook for 2020 and possibly 2021.
On April 9, S&P Dow Jones forecast first-quarter earnings of $ 34.71 per share for the S&P 500, down 8.6% from a year ago.
Meanwhile, second quarter earnings are down 18.3% from the second quarter of 2019. For the full year, earnings are expected to decline 6.7% to $ 146.57 per share from 2019.
EPS estimate changes
(Data collected from S&P Dow Jones)
Trending Lower
It seems like a long time ago, but on December 31, 2019, S&P Dow Jones predicted a profit of $ 175.52 for the S&P 500 in 2020. However, those estimates have fallen by 16.5% over the past four months. It is a stunning turn in such a short period of time.
At the same time, profit expectations for the first quarter decreased by 13.9% and by 24.6% for the second quarter. But these have been declining steadily for some time and have only accelerated in recent weeks.
JPM earnings, earnings results
(JPM Income and Income Results)
Banks have set a weak tone
Companies like JPMorgan (NYSE 🙂 and Bank of America (NYSE 🙂 missed quarterly earnings expectations by a wide margin. As a result, consensus analyst estimates for these companies have fallen even further. For example,
Analysts cut their earnings expectations for JPMorgan by 48.8% in 2020 last month, and are now seeing the company earn only $ 5.44 this year, compared to $ 10.72 per share a year ago. .
Bank of America has also seen a significant decline in its earnings expectations, with analysts cutting their forecast for 2020 by more than 36% over the past 30 days to $ 1.85 per share, down 36.7 % compared to last year.
Technology may have to save the day
It will have to come down to some of the big technology stocks to positively impact earnings. Until now, analysts don't see much impact on earnings for companies like Apple (NASDAQ 🙂 or Amazon (NASDAQ :).
According to the latest estimates, Apple will see earnings rise by 5.2% in 2020 to $ 12.51 per share. Apple's estimates are on the decline, but not nearly as much as bank shares, with analysts cutting Apple estimates by just 5.9% over the past month.
Meanwhile, Amazon's earnings expectations have shrunk by just 2.4% to $ 28.48 per share over the past month. That would deliver earnings growth of 23.8% in 2020. As the shares have traded in recent weeks, the market seems to believe that the outlook may even have a positive side, as the shares have recently hit a new all-time high.
It is a mystery how the earnings season will eventually go. Still, if current trends continue, it seems likely that we will continue to see profit estimates for 2020 continue to fall, especially in this sheltered environment where the world appears to be held hostage by the corona virus.
What seems clear is the importance of the first quarter results and the prospects that companies offer. It will likely set the tone for the year's balance sheet and possibly the prospects for 2021.
Disclosure: Michael Kramer and Mott Capital's clients own shares in AAPL.
Disclaimer: Mott Capital Management, LLC is a registered investment advisor. The information presented is for educational purposes only and is not intended to make an offer or request for the sale or purchase of specific securities, investments or investment strategies. Investments carry risks and are not guaranteed unless otherwise stated. Be sure to consult with a qualified financial advisor and / or tax professional before implementing any strategy discussed herein. Upon request, the consultant will provide a list of all recommendations made in the past 12 months. Past performance is not an indicator of future results.
