Tariffs, Margins and the Q4 Earnings Season

The mixed guidance from bellwether retailers like Walmart WMT notwithstanding, the overall picture emerging from the Q4 earnings season has been of resilient growth and improving outlook. Tariffs remain a headwind and have been a recurring theme on the Q4 earnings calls, with companies from variety of sectors like Proctor & Gamble PG and 3M MMM citing it as a negative factor.

Tariffs are weighing on margins, with Q4 net margins for the 96% of S&P 500 index members that have reported already modestly below the preceding quarter’s level. At the sector level, Q4 net margins are below the preceding quarter’s level for 9 of the 16 Zacks sectors, with the Construction, Industrial Products, Autos, Medical and Transportation sectors experiencing the biggest margin squeeze. On the positive side, net margins expanded sequentially the most for the Tech, Finance and Aerospace sectors.

The chart below compares the reported Q4 net margins relative to other recent periods and historical ranges.

With respect to the Q4 earnings season scorecard, we now have results from 481 S&P 500 index members or 96.2% of the index’s total membership. Total earnings for these companies are up +15.1% from the same period last year on +9.4% higher revenues, with 74.8% beating EPS estimates and 73.4% beating revenue estimates.

For more details about the Q4 earnings season and evolving expectations for the current and coming periods, please check out our weekly Earnings Trends report here >>>Retail Sector Earnings in Focus

Zacks' Research Chief Names "Stock Most Likely to Double"

Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.

This top pick is a little-known satellite-based communications firm. Space is projected to become a trillion dollar industry, and this company's customer base is growing fast. Analysts have forecasted a major revenue breakout in 2025. Of course, all our elite picks aren't winners but this one could far surpass earlier Zacks' Stocks Set to Double like Hims & Hers Health, which shot up +209%.

Free: See Our Top Stock And 4 Runners Up

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Procter & Gamble Company (The) (PG): Free Stock Analysis Report

Walmart Inc. (WMT): Free Stock Analysis Report

3M Company (MMM): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research