Viernes, 12 de Enero de 2018 Redacción

Liquid Insight: 4Q US earnings season: Expect a beat, and focus on the commentary •   We expect S&P 500 4Q17 EPS to slightly beat analysts' expectations, with both top- and bottom-line growth accelerating. •   Focus on several key aspects of management commentary: tax reform, capex guidance, and labor costs.
•   Tech and Energy screen best in our quant work ahead of earnings season, while Telecom, REITs and Health Care screen worst.

4Q17 earnings: expect a beat and pickup in growth

S&P 500 4Q earnings season kicks off this week, with 5% of index earnings slated to report (dominated by big banks). While one-time items related to tax reform could impact 4Q GAAP EPS (charges related to the repatriation tax, the write-down of deferred tax assets and liabilities), these will likely be excluded from pro forma EPS. Analysts have trimmed pro-forma EPS estimates much less than usual ahead of earnings: the three-month cut of 0.4% is the smallest in nearly seven years (Chart 1), and estimates have actually turned up since mid-November (Chart 2), led by Energy and Tech. Analysts expect EPS of $34.82, implying 11% YoY earnings growth (vs 3Q's 7%). We forecast $35.07, implying a 1% beat. Strong guidance, a healthy global economy and higher oil prices support a pickup in growth, and record US data surprises along with record results from the early reporters suggest to us a beat is likely. But as we discuss inside, more important than beats and misses this quarter will be management commentary on several key topics, including tax reform, capex, and labor costs.

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