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Looking Ahead to the Q2 Earnings Season
Looking Ahead to the Q2 Earnings Season

Globe and Mail

time7 hours ago

  • Business
  • Globe and Mail

Looking Ahead to the Q2 Earnings Season

The expectation is for Q2 earnings to increase by +5% from the same period last year on +4% higher revenues. This will be a material deceleration from the growth trend of recent quarters and will be the lowest earnings growth pace since the +4.3% growth rate in 2023 Q3. We have been regularly flagging in recent weeks that 2025 Q2 earnings estimates have been steadily decreasing, as shown in the chart below. As we have been consistently flagging, earnings estimates took a renewed hit at the start of Q2, following the early April tariff announcement. This was particularly notable for Q2, but estimates for the subsequent periods were also trimmed. While the revisions trend has notably stabilized in recent weeks, the magnitude of cuts to 2025 Q2 estimates since the start of the period is larger and more widespread compared to what we have become accustomed to seeing in the post-COVID period. Since the start of April, Q2 earnings estimates have declined for 13 of the 16 Zacks sectors (Aerospace and Utilities are the only sectors whose estimates have increased), with the biggest cuts to Conglomerates, Autos, Transportation, Energy, Basic Materials, and Construction sectors. Estimates for the Tech and Finance sectors, the largest earnings contributors to the S&P 500 index, accounting for more than 50% of all index earnings, have also been cut since the quarter got underway. But as we have been pointing out in recent weeks, the revisions trend for the Tech sector has notably stabilized in recent weeks, which you can see in the chart below. We see this same trend at play in annual estimates as well. The chart below shows the Tech sector's evolving earnings expectations for full-year 2025 A likely explanation for this stabilization in the revisions trend is the easing in the tariff uncertainty after the more punitive version of the tariff regime was delayed. Analysts began revising their estimates downward in the immediate aftermath of the early April tariff announcements but appear to have since concluded that those punitive tariff levels are unlikely to be levied, helping to stabilize the revisions trend. The chart below shows current Q2 earnings and revenue growth expectations in the context of the preceding four quarters and the coming three quarters. The chart below shows the overall earnings picture on a calendar-year basis. In terms of S&P 500 index 'EPS', these growth rates approximate to $254.14 for 2025 and $287.31 for 2026. The chart below shows how these calendar year 2025 earnings growth expectations have evolved since the start of Q2. As you can see below, estimates fell sharply at the beginning of the quarter, which coincided with the tariff announcements, but have notably stabilized over the last four to six weeks. Q2 Earnings Season Scorecard As noted earlier, we have already seen fiscal May-quarter results from 18 S&P 500 members, which we count as part of our Q2 tally. Total earnings for these 18 index members that have reported results are up +3.1% from the same period last year on +6.5% revenue gains, with 83.3% of the companies beating EPS estimates and 88.9% of them beating revenue estimates. The comparison charts below put the Q2 earnings and revenue growth rates for these index members in a historical context. The comparison charts below put the Q2 EPS and revenue beats percentages in a historical context. We are not drawing any conclusions from these results, given the small sample size at this stage. But we nevertheless wanted to put these early results in a historical context. We have less than a dozen companies on deck to report results this holiday-shortened week, including Constellation Brands STZ from the S&P 500 index. Constellation produces alcoholic beverages, with a portfolio of beer-heavy products, including Modelo, Corona, and others. Constellation shares have been under pressure this year, with the stock down -27% in the year-to-date period and lagging the broader market's +3.8% gain. Constellation's core product, Modelo, is heavily indexed to Hispanic consumers, with over 50% of the brand's sales coming from this demographic group. While the labor market remains strong, consumption trends of this demographic group have been weighed down by affordability issues. Aluminum tariffs are another headwind for Constellation Brands, given the company's exposure to the industrial metal for beer cans. Among the notable recent earnings releases, market participants were pleased with the Nike NKE announcement but were less enthusiastic about the FedEx FDX report. Both companies have been big-time laggards lately, with Nike shares down -4.8% this year, even after the big post-release jump, and FedEx shares are down -18.5%. While there were undoubtedly a few 'green shoots' in the Nike release, the stock's strong positive reaction is more a function of how low expectations had been coming into the release rather than truly impressive numbers. Nike still faces multiple challenges, including margin pressure, a stagnant product portfolio, operational challenges in China (accounting for approximately 15% of total sales), and significant tariff exposure. We should note, however, that both Nike and FedEx beat top- and bottom-line consensus estimates. Zacks' Research Chief Picks Stock Most Likely to "At Least Double" Our experts have revealed their Top 5 recommendations with money-doubling potential – and Director of Research Sheraz Mian believes one is superior to the others. Of course, all our picks aren't winners but this one could far surpass earlier recommendations like Hims & Hers Health, which shot up +209%. See Our Top Stock to Double (Plus 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 NIKE, Inc. (NKE): Free Stock Analysis Report FedEx Corporation (FDX): Free Stock Analysis Report Constellation Brands Inc (STZ): Free Stock Analysis Report

Tokio Marine Holdings Inc. (TKOMY) Could Be a Great Choice
Tokio Marine Holdings Inc. (TKOMY) Could Be a Great Choice

Yahoo

time8 hours ago

  • Business
  • Yahoo

Tokio Marine Holdings Inc. (TKOMY) Could Be a Great Choice

Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments. While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases. Headquartered in Tokyo, Tokio Marine Holdings Inc. (TKOMY) is a Finance stock that has seen a price change of 15.74% so far this year. The company is currently shelling out a dividend of $0.56 per share, with a dividend yield of 2.64%. This compares to the Insurance - Property and Casualty industry's yield of 0.54% and the S&P 500's yield of 1.6%. In terms of dividend growth, the company's current annualized dividend of $1.10 is up 1.3% from last year. Over the last 5 years, Tokio Marine Holdings Inc. has increased its dividend 4 times on a year-over-year basis for an average annual increase of 10.66%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Tokio Marine's current payout ratio is 31%. This means it paid out 31% of its trailing 12-month EPS as dividend. Earnings growth looks solid for TKOMY for this fiscal year. The Zacks Consensus Estimate for 2025 is $4.04 per share, with earnings expected to increase 12.53% from the year ago period. Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer a quarterly payout. Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, TKOMY presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #1 (Strong Buy). 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 Tokio Marine Holdings Inc. (TKOMY) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data

RGA Stock Trading at Discount to Industry at 1.14X: Time to Hold?
RGA Stock Trading at Discount to Industry at 1.14X: Time to Hold?

Yahoo

time8 hours ago

  • Business
  • Yahoo

RGA Stock Trading at Discount to Industry at 1.14X: Time to Hold?

Reinsurance Group of America RGA shares are trading at a discount to the Zacks Life Insurance industry. Its forward price-to-book value of 1.14X is lower than the industry average of 1.97X, the Finance sector's 4.18X and the Zacks S&P 500 Composite's 8.18X. The life insurer has a Value Score of insurer has a market capitalization of $13.13 billion. The average volume of shares traded in the last three months was 0.4 of Sun Life Financial Inc. SLF and Primerica, Inc. PRI are also trading at a multiple higher than the industry average, while Manulife Financial Corp. MFC shares are trading at a discount. Image Source: Zacks Investment Research Shares of Reinsurance Group are trading above the 50-day simple moving averages (SMA) of $197.98, indicating solid upward momentum. Shares of this life insurer have lost 3.2% in the past year against the industry's growth of 14.8%, the Finance sector's return of 19.7% and the S&P 500 composite's appreciation of 11.3%. Image Source: Zacks Investment Research Reinsurance Group has a decent earnings surprise history. Its earnings beat estimates in three of the last four quarters and missed in one, with an average surprise of 7.85%. The Zacks Consensus Estimate for Reinsurance Group's 2025 earnings per share indicates a year-over-year increase of 2.2%. The consensus estimate for revenues is pegged at $23.45 billion, implying a year-over-year improvement of 2.6%. The consensus estimate for 2026 earnings per share and revenues indicates an increase of 11.1% and 9.8%, respectively, from the corresponding 2024 estimates. Earnings have grown 15.3% in the past five years, better than the industry average of 7.8%. RGA has an impressive Growth Score of B. This style score helps analyze the growth prospects of a company. Based on short-term price targets offered by 11analysts, the Zacks average price target is $244.64 per share. The average suggests a potential 25.1% upside from the last closing price. Image Source: Zacks Investment Research Four of the six analysts covering the stock have raised estimates for 2025, and two analysts have raised the same for 2026 over the past 60 days. Thus, the Zacks Consensus Estimate for 2025 and 2026 earnings has moved up 1.2% and 0.3%, respectively, in the past 60 days. Image Source: Zacks Investment Research Its return on invested capital (ROIC) has increased every year, reflecting RGA's efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 6%, higher than the industry average of 0.6%. Reinsurance Group is a leader in the traditional U.S. and Latin American markets. It has successfully expanded its product line with market-leading services, capabilities, expertise and innovation. Individual mortality has matured, providing a base for stable earnings and capital generation. Significant value embedded in the in-force business is anticipated to generate predictable long-term earnings. Product-line expansion contributes to risk Canada, Reinsurance Group is a market leader with solid growth and profitability. It has a sizable block of in-force business, which is a significant source of future earnings. Reinsurance Group expects longevity insurance, projected to witness steady demand, to experience long-term growth in the Canadian market. While longevity insurance provides a diversified income source, it also acts as a hedge against a large mortality position. Demand for protection products among the emerging global middle class and increasing demand for retirement, senior protection and savings products among aging populations create opportunities for growth in new business. RGA is well-capitalized and has access to multiple forms of capital. RGA expects to remain active in deploying capital in attractive growth opportunities while balancing returning excess capital to shareholders over Group continues to ramp up technological inclusion with its product. This insurer is a global biometric liability reinsurance leader. Biometrics experience, which includes mortality, morbidity and longevity, over the last five quarters was company's free cash flow conversion has remained more than 85% over the last few quarters, reflecting its solid earnings. This global reinsurer has also been managing capital effectively via share buybacks, dividend payments and prudent investments. RGA expects to remain active in deploying capital into attractive growth opportunities in organic flow and in-force block transactions and returning excess capital to shareholders through dividends and share repurchases. New business volumes, favorable longevity experience, a diversified business and effective capital deployment should continue to favor RGA over the long term. The stock also has a VGM Score of A. VGM Score helps identify stocks with the most attractive value, best growth and the most promising solid growth projections as well as attractive valuations are other positives. Coupled with optimistic analyst sentiment and favorable ROIC of the stock, it is, therefore, wise to hold on to this Zacks Rank #3 (Hold) stock. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. 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 Manulife Financial Corp (MFC) : Free Stock Analysis Report Reinsurance Group of America, Incorporated (RGA) : Free Stock Analysis Report Primerica, Inc. (PRI) : Free Stock Analysis Report Sun Life Financial Inc. (SLF) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data

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