How To Approach Q4 Earnings: The Analyst Perspective

As this earnings season delivers its final few highlights, traders and investors are already beginning to process what the corporate results and guidance might signal for the current fiscal year. But some big names have yet to report their Q4 numbers against analyst estimates, and those results stand to carry a lot of weight alongside FY 2019 projections.

Analyst estimates, which are generated by averaging out company revenue projections from an array of analysts, can change many times from one earnings report to the next. Gauging the trend in these revisions, traders can piece together a sense of the expert sentiment surrounding these stocks. This can be extremely useful in anticipating how impactful an individual earnings report might be relative to expert opinion.

Using some of the earnings estimate tools provided by stock research platform Finscreener, these estimates, as well as their changes over the past several month, bring the market’s overall resilience into sharper relief.

First, take a look at the entire spectrum of S&P mega caps that are still set to report in the coming weeks.

You can see that, aside from a few standouts like Boeing Co. BA and Intel Corporation INTC, which saw their long-term revisions climb by 6.34 and 10.91 percent respectively, the vast majority of upcoming reports will be delivered in the context of much softer analyst opinions. What’s more, with the exception of Boeing and Walmart Inc. WMT, the most recent upward adjustment in any of the above stocks was more than 60 days ago.

While these estimates are simply a benchmark to measure how analysts feel companies should have performed in the context of the prior three months, their context often impacts how traders and investors react to a beat or a miss. As the analyst trend retreats to more modest EPS figures, investors should go into upcoming reports knowing whether a beat is really cause to buy, or a signal that it’s time to take profits.

For the benefit of traders looking ahead to the first few reports due out at the end of January into February, here’s a condensed list of analyst estimates for those companies reporting into next month.

Energy names like Exxon Mobil Corporation XOM and Chevron Corporation CVX are unsurprisingly lower in analyst estimates given how depressed oil prices have become over the past several month. However, less drastic negative trends in The Coca-Cola Co. KO and Berkshire Hathaway Inc. (NYSE: BRK-B) could either make for stronger reaction on a larger beat, or, should they miss, better context on just how bad the miss was given the lower analyst outlook

Depending on the market, consensus analyst estimates can have a differing weight. However, understanding the history behind those figures, and reacting to earnings results within that context, can provide a leg up in anticipating future revisions or earnings announcements throughout the market.