A few companies have come up their first-quarter earnings results, with Alcoa (AA) being the first among the S&P 500 members to report after the closing bell on Monday. The overall earnings picture for the first quarter appears gloomy with estimates remaining low. In fact, over the last three months, Q1 estimates have fallen significantly, thanks mainly to the persistent oil price weakness. The unfavorable earnings picture is expected to continue through the first half of this year, with growth unlikely before late 2016.
Discouraging Q1 Earnings Estimates
Going by the expected quarterly performances for Q1, the year-over-year earnings for the S&P 500 will likely fall by 10.3%, which is worse than the 6.4% decline in the prior quarter. Most importantly, the S&P 500 index will witness earnings decrease for the fourth consecutive quarter.
Among the dampeners of the first quarter, the most prominent is the slump in oil prices during the first six weeks of the year. A stronger dollar that hit hard the export-oriented companies and China-related woes are added risks to the upcoming results.
In details, among the 16 Zacks sectors, negative earnings growth are anticipated to be witnessed by 11, including technology and finance that hold significant weight in the overall index. Moreover, the Energy sector, which has been dragging the market down for a length of time, will likely decline the most among all the sectors.
What is most striking is that Q1 estimates experienced the highest magnitude of negative earnings revisions among the recent comparable quarters. In fact, 15 out of the 16 Zacks sectors suffered declining estimates since the start of the period.
5 Stocks with Rising Estimates
In spite of all the hiccups in Q1, we have cherry picked stocks with the help of our screening methodology that have been able to bear the turmoil. These stocks with northward earnings estimates are poised to impress when they report later this month. The stocks not only have a Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy) but also witnessed at least 5% rise in Q1 earnings estimates over four weeks.
