The fourth quarter of Wall Street starts this week with 24 reporting companies, including major Wall Street banks such as (NYSE :), (NYSE :), (NYSE :), (NYSE :), (NYSE 🙂 and (NYSE 🙂
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FactSet data show that analysts expect revenues to fall by 2.0% in the fourth quarter compared to the same period last year, ending another year with poor results. If this is confirmed, this will be the first time that the index has recorded four consecutive quarters of year-on-year declines in profit since Q3 2015 until Q2 2016.
Six sectors are expected to announce a Y-o-Y slowdown in earnings, led by the, and sectors. On the other hand, five are predicted to publish earnings growth on an annual basis, led by utilities and sectors.
S&P 500 earnings growth: Q4 2019
Income expectations are equally alarming. The predicted Y-o-Y rate for the fourth quarter of 2019 is only 2.6%, which would be the lowest income rate for the index since the second quarter of 2016.
Of the eleven sectors, three are expected to report a decline in Y-o-Y sales, again led by the Materials and Energy sectors. Meanwhile, eight sectors are showing increases with Utilities and leading.
S&P 500 revenue growth: Q4 2019
2 sectors expected to disappoint
1. Energy: low crude oil and gas prices weigh on the sector
According to FactSet, the energy sector is expected to show the highest Y-o-Y profit losses of all eleven sectors, with a huge 36.8% drop in quarterly earnings in the fourth quarter a year earlier. With low and prices that burden the sector, the second-largest Y-o-Y in sales is expected to fall by -7.2%.
Digging deeper, the profit of four of the six sub-industries is expected to fall by more than 20%. Shares in the oil and gas drilling group will perform the worst, with an estimated profit of no less than 75%. Revenues from oil and gas refining and marketing and integrated oil and gas companies are expected to fall by -51% and -46%.
Two companies in the group distinguish themselves by their potential to record significant declines in profit growth: Exxon Mobil (NYSE 🙂 and Chevron ] (NYSE :). For Exxon, the average earnings per share for the fourth quarter of 2019 is $ 0.59, a decrease of 46% compared to the earnings per share of $ 1.29 in the same period a year ago. For Chevron, the average Q4 2019 EPS estimate is $ 1.55, more than 20% below the EPS of $ 1.95 in the same period a year earlier.
Other notable names that must undergo a significant reduction in their Q4 earnings per share are Occidental Petroleum (NYSE 🙂 and ConocoPhillips (NYSE :). The average EPS estimate for Occidental Petroleum for the fourth quarter of 2019 is $ 0.05, compared to $ 1.22 a year ago. The average Q4 EPS estimate for ConocoPhillips is $ 0.80, compared to $ 1.13 in the same period a year earlier.
2. Discretionary for consumers: Cars lead sector lower
The Consumer Discretionary sector is expected to report the second-highest Y-o-Y profit decline of all eleven sectors, with a dismal -13.5%. Eight of the eleven sub-industries in the sector are expected to see declining profits, four of which are expected to suffer double-digit losses, led by car stocks, which see their collective earnings per share 69% compared to a year ago.
Two of the three companies that are expected to lead the sector's profit slide are General Motors (NYSE 🙂 and Ford (NYSE :). For GM, which has already warned of a hit of more than $ 2 billion due to earnings in the fourth quarter due to the impact of a 40-day strike at its US plants in the fall, the average earnings forecast for the fourth quarter of 2019 is $ 0.21, while earnings per share a year ago were $ 1.43. For Ford, the average earnings forecast for the fourth quarter of 2019 is $ 0.17, compared to the annual earnings of $ 0.30.
Meanwhile, Amazon (NASDAQ 🙂 is estimated to report the third-largest decline in earnings in the industry, with an average fourth-quarter earnings outlook of $ 4.05, compared to earnings per share of $ 6.04 over the same period. years earlier. The company's plan to continue upgrading the free one-day shipment from Amazon Prime is an important driver for this potential decline.
Two more names to report a significant slump in earnings per share: Gap (NYSE 🙂 and Hasbro (NASDAQ :). The controversial clothing store has an average Q4 2019 EPS estimate of $ 0.35, while EPS was $ 0.71 a year ago. The average EPS estimate of toy manufacturer Hasbro for the fourth quarter of 2019 is $ 0.95, compared to the annual profit of $ 1.33.
Search for robust results from this sector
1. Utilities: all sub-industries report growth
The utilities sector could benefit from the wind in the back of the easy monetary policy of the Federal Reserve, as it is expected to report the highest YoY earnings growth of all eleven sectors, with a profit increase of 19.5% compared to the same period a year ago.
All five of the sub-industries in the sector are expected to report EPS growth, with double-digit earnings growth of four: Independent Power and Renewable Electricity Producers (+ 138%), Multi-Utilities (+ 26%), Electric utilities (+ 12%) and gas aids (+ 12%).
Analysts cite Utilities as the sector that probably reports the next highest Y-o-Y sales growth at + 9.8%. Three of the five sub-industries in the group have to report double-digit sales growth: independent producers of energy and renewable electricity (+ 60%), multi-utilities (+ 16%) and electrical utilities (+ 11%)
The Utilities Select Sector SPDR Fund (NYSE :), almost always trades high because the sector's most important ETF tends to perform in low interest rate environments because of their attractive dividend yield. The ETF has increased by 18% in the last 12 months.
At company level, Dominion Energy (NYSE 🙂 and American Electric Power (NYSE 🙂 are two to watch. Dominion's revenue forecast is $ 4.81 billion, an increase of 43% compared to revenue of $ 3.36 billion a year ago, while AEP expects revenue of $ 4.03 billion, bringing it to a value of $ 3.8 billion.
