The Q4 earnings season is underway. And this time we are going to see some big swings on the Wall Street. Markets were obsessed with the Federal Reserve’s stimulus last year. But rising corporate earnings are expected to be the focus in 2014. U.S. economic growth is gathering momentum despite the partial government shutdown and lukewarm Holiday retail sales.
S&P performance to improve through 2014?
The S&P 500 index suffered an earnings drought for five quarters before witnessing some improvement in Q3. Louis Navellier, the editor of Blue Chip Growth expects Q4 earnings to show significant growth. And the momentum is likely to continue through 2014. Many corporations are reaping the benefits of a currency tailwind as the dollar index stands near a one-year low against its major counterparts.
So, the Q4 earnings season is expected to deliver strong revenue and profits growth. Analysts polled by Thomson Reuters estimate the S&P 500 earnings to jump 7.6% YoY. That will be the fastest earnings growth since Q2, 2012. Revenues are expected to rise 0.4% from the corresponding period a year ago. Analysts say the S&P earnings are likely to jump 6.6% in Q1, 2014, and the full year 2014 will see a profit growth of about 10.8%. Telecom sector is expected to post the biggest earnings growth of 22.6% in Q4, followed by financials with 22.4%. Though revenue in the financial sector is estimated to decline 12.5%.
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We will see several big earnings announcements over the next few days. Let’s look at what analysts expect from the Q4 earnings season and the good, bad and ugly of the stock world.
Q4 earnings season: good stocks
American Express Company (NYSE:AXP), which is scheduled to report its Q4 results on January 16. Analysts expect the company’s sales to jump 5%, while earnings are likely to rise 14.7%. Financial services firm Charles Schwab Corp (NYSE:SCHW) is likely to report 14.4% sales growth with a stupendous 40% rise in earnings. UnitedHealth Group Inc. (NYSE:UNH)’s sales should jump 12.4%, but its earnings are likely to rise a meager 1.3%.
Q4 earnings season: bad stocks
Many stocks are expected to get hurt after the fourth quarter results are out. Leading the pack is Goldman Sachs Group Inc (NYSE:GS), which is going to report earnings on January 16. Its sales are likely to decline 17.4% while earnings are expected to tank 26.1%. Another banking giant, JPMorgan Chase & Co. (NYSE:JPM) is expected to see a 2.3% decline in sales and 4.3% downside in earnings. Bank of America Corp (NYSE:BAC)’s sales may decline by 1.7% in Q4, but its recent cost-cutting plans to improve earnings.
Q4 earnings season: ugly stocks
Some really bad (call them ugly) companies will also be reporting their results over the next few days. Alcoa Inc (NYSE:AA)’s sales are likely to decline 8.5%, while its earnings will remain flat. Sales of SunTrust Banks, Inc. (NYSE:STI) are expected to sink 11.2%, though its earnings may rise by 6.2%. On the other hand, Citigroup Inc (NYSE:C)’s sales are expected to decline 1.1%, but its earnings may see an upside of 49.3%.
There will be a lot more results during the Q4 earnings session, but these are the once that will be reporting over the next week.