Earnings season is in full force this week, with a barrage of bank, tech and consumer discretionary earnings. In total, 33 companies within the S&P 500 are slated to report. These are the companies that have the biggest deltas between the Estimize and Wall Street consensus both on the EPS and revenue front:
Goldman Sachs (GS)
Financials - Capital Markets | Reports October 15 before the open
The Estimize consensus calls for EPS of $4.11 vs. Wall Street’s $3.36, a 22% delta. The Estimize community is also expecting higher revenues of $8.15B as compared to the Street’s prediction of $7.65B
What to watch: Goldman Sachs has had some headwinds to deal with in Q3. Banks continued to be haunted by stubbornly low interest rates, which don’t show any sign of tightening this year, meaning meager interest revenues for the rest of the year. Making matters worse is the recent forecast from the Mortgage Bankers Association which is expecting an 8% QoQ decline in home-loan originations. Several banks have also signaled that trading revenues will fall, while equities have been strong due to volatile markets, it may not be enough to offset fixed income, currency and commodity (FICC) trading. One bright spot is M&A activity which is sure to benefit investment banks such as Goldman. Completed M&A deals totaled $867B vs. Q2’s $820B (6% improvement QoQ, 40% YoY), making Q3 2015 one of the best quarters since the economic downturn in 2008.
Financials - Diversified Financial Services | Reports October 15 before the open
The Estimize consensus calls for EPS of $1.40 vs. Wall Street’s $1.33. The Estimize community is also expecting higher revenues of $19.3B as compared to the Street’s prediction of $18.9B.
What to Watch: Expect Citigroup to mention similar headwinds as Goldman Sachs, without the M&A benefit. Despite recent upgrades from Jefferies and Credit Suisse, Citigroup’s stock is still down 6% for the year. While volatile equity markets will boost revenues, fixed income trading in particular will evaporate any of those gains. Comments regarding the need for higher interest rates are also likely. Citigroup is expected to see gains particularly in consumer revenue. What the bank does have going for it is the fact that it doesn’t owe any large legal fees this quarter, and that fallout from losses related to the Swiss franc revaluation in the first quarter has ceased.
Industrials - Machinery | Reports October 15, before the open
The Estimize consensus calls for EPS of $1.26, 19 cents higher than Wall Street, a delta of 18%. The Estimize community is also expecting higher revenues of $1.95B vs. the Street’s expectation for $1.814B.
What to watch: No doubt, industrials is one of the weak spots this quarter, with EPS expected to come in at 1.2%. Machinery is one of the detracting sectors, anticipated to decline 10.3%. While Dover is not expected to have a great quarter, it seems the Estimize community believes Wall Street has revised estimates too low. The company’s energy segment will be the biggest draw on results again this quarter, a business that saw revenues decline by 24% in the most recent quarter. The largest segment, Engineered Systems, which makes up 32% of total revenues, declined 9%, and did slightly better on earnings which only declined 5%. Fluids, a much smaller business, saw earnings increase 11% in Q2. Despite lackluster results, the company reaffirmed its updated 2015 guidance for adjusted EPS in the range of $3.75 - $3.90, including a $0.16 - $0.19 restructuring charge. Currency headwinds remain the biggest challenge, expected to shed 4% off of full year revenue.
Information Technology - Internet Software & Services | Reports October 15 before the open
The Estimize and Wall Street consensus on TZOO are in-line at $0.07, but it’s on the top-line that the real disparity can be seen. Estimize is looking for revenue of $35.72, 7% below Wall Street’s consensus for $38.5B.
What to watch: Despite the large disparity between the Estimize and Wall Street top-line expectations for Travelzoo, this might still be one of their best quarters in a while. Even with Estimize’s much lower revenue consensus, sales are expected to be up 6.6% YoY after 6 quarters of negative results. Similarly, EPS is expected to grow 250% in Q3 after 8 consecutive quarters in the red. Certainly the year-over-year comparisons are easier this quarter. After all, three of the company’s divisions – travel, search and local deals – hit a wall in 2014. Travelzoo’s new hotel booking platform launched in the beginning of 2014 did not receive much traction, however it looks like 2015 is back on track, showing steadier streams of traffic. This is not a huge surprise considering how well many of these travel sites have been doing thanks to US consumers having more discretionary income It’s the international travelers and strong US dollar the company still has to worry about.
Consumer Discretionary - Leisure Equipment & Products | Reports October 15 after the close
The Estimize community expects EPS of $0.75, well below Wall Street’s expectation for $0.80. Revenues are also anticipated to come in lower, with the Estimize consensus calling for $1.891B vs. the Street’s $1.897B.
What to watch: For a children’s entertainment company Mattel is incredibly far behind the trend in mobile gaming. Kids aren’t playing with toys anymore, they are playing apps on their iPad, and on video game consoles. While they have been trying to get into the mobile game space, none of their productions have caught on yet, especially with single game hits being produced from studios such as King Digital and Zynga. Perhaps Mattel’s most famous toy, Barbie, is now seen as outdated and setting unrealistic expectations for young women. In 2014, Barbie sales were down 16% compared to one year prior. To make matters even more bleak, last September Mattel lost the rights to sell Disney princess dolls to its chief rival Hasbro. Mattel can no longer depend on selling Frozen dolls going forward, which was previously a growth area for the company.
What do you think? Is the crowd onto something? Get your estimates in here before Thursday!