Investors are keeping an eye as the Q2 earnings season has gained momentum, so far unveiling modest improvement compared to the last couple of quarters. Per the latest Zacks Earnings Trends report as of Jul 22, out of the 126 S&P 500 members that have come up with their quarterly numbers, approximately 70.6% have posted positive earnings surprises, while 55.6% beat top-line expectations.
According to the report, earnings for the 126 S&P 500 companies that have reported so far are down 1.1% from the same period last year, while revenues have dropped 2.6%.
The report further projects that earnings for the total S&P 500 companies will decline 3.4% from the year-ago period, and total revenue will dip 0.5%. We observe that this will be the fifth straight quarter, if the index witnesses a decline in earnings. Well, as the earnings season gets into full swing, the scenario would be much more prominent. So don’t be in a rush to count your chickens before they hatch.
The performance of the index is not restricted to a single sector, and of the 16 Zacks sectors, 9 are expected to witness an earnings decline in Q2, with Basic Materials, Industrial Products, Oil/Energy, Technology and Transportation being a big drag. However, the Consumer Discretionary sector is showing some resilience in spite of overseas turmoil.
Total earnings for the Consumer Discretionary sector are expected to drop marginally by 0.6%, whereas revenues are projected to increase 3.4%. As of Friday, 22.9% of the total number of S&P 500 companies in this sector had reported their results, wherein all delivered an earnings beat and about half cruised ahead of revenue estimates. While earnings surged 14.4% year over year, revenues advanced 4.4%. Recreation stocks form part of the Consumer Discretionary sector.
Among recreation stocks lined up to report results, let’s take a sneak peek at two companies.
Callaway Golf Company (NYSE:ELY) , the manufacturer and seller of golf clubs, golf balls and golf accessories, is slated to report second-quarter 2016 results on Jul 27. Our proven model shows that Callaway Golf Company is likely to beat earnings estimates this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. The Most Accurate estimate stands at 37 cents, while the Zacks Consensus Estimate is pegged at 33 cents. So the ensuing +12.12% ESP and the company’s Zacks Rank #1 (Strong Buy) make us reasonably confident of an earnings beat. In the trailing four quarters, the company outperformed the Zacks Consensus Estimate by an average of 34.7%.
Another recreation stock, Marine Products Corp. (NYSE:MPX) is expected to report second-quarter 2016 results on Jul 27. This designer, manufacturer and distributor of premium-branded Chaparral sterndrive, jet drive and outboard pleasure boats has an Earnings ESP of 0.00% and a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for the quarter currently stands at 14 cents. In the trailing four quarters, the company surpassed the Zacks Consensus Estimate by an average of 14.8%.
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