2018 Q4 Earnings Sentiment: Recapping Our Top Insights

Happy New Year! At last it's January where the P&L gets reset to zero.

At Amenity Analytics, we were quite active in December leveraging the Amenity Viewer platform to drive our weekly Market Insights blog content. January is full of outlooks for the year ahead, so in lieu of a big picture 2019 forward-looking post that will be rendered obsolete by new information in a matter of weeks, here is a recap of where we focused throughout the Q4 earnings season:

1. MedTech sector Trade War headwind on the horizon. U.S./China tariffs on the MedTech sector were just implemented in September, which means most management teams were able to kick the can down the road when discussing the potential impact. Through Amenity Viewer's Query Insights tool, we identified several instances of company outlooks that may prove overly optimistic. Stay tuned for reports from presentations at the J.P. Morgan Healthcare Conference next week for updates.

2. Supply Chain pressure on Consumer/Retail sector. By most accounts, e-commerce demand remained strong throughout the holiday season, but that only tells part of the story. Mix shift towards e-commerce can present a gross margin headwind for retailers, especially with freight and transportation cost inflation. We have been tracking this theme since September (UNFI, Chico’s, FedEx), and will look for more speed bumps ahead in Q4 earnings.

3. 5 under the radar companies with improving sentiment from earnings calls. In the midst of recent concern related to slowing economic growth, a hawkish Fed,political shifts in the U.S. and Europe, as well as U.S. and China trade tension, we identified 5 companies with positive drivers entering 2019: Lands End, Roper Technologies, Pure Storage, First Horizon National, and Pitney Bowes.

4. "Deception" analysis in earnings calls highlights risk to Merck's margin expansion. Amenity Analytics' Deception model is able to read between the lines of CEO and CFO commentary on earnings calls to identify evasive language, attempting to spin a negative,tension with the analyst community, etc. A pattern on the Merck Q3 earnings call may give reason to temper enthusiasm on margin expansion prospects.

Please note: This in no way represents investment advice. All transcript text provided by S&P Global Market Intelligence.

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Transcript text provided by S&P Global Market Intelligence.

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