Tuesday, April 29, 2014
Stocks are indicated higher ahead of the open today. But as we
have become used to seeing lately, market sentiment can shift
intraday without much advanced warning. With the earnings season
now past the halfway mark and a seasonally weak period ahead for
the market, we should probably brace ourselves for more weakness
and volatility in the coming days.
Q1 earnings results have not been as weak as the extremely low
levels to which estimates had fallen ahead of the start of the
reporting season seemed to suggest. But this positive-looking
development has proven insufficient to give this year's tentative
market a directional thrust. And for good reason. Stocks ran up
big last year in anticipation of earnings growth resumption down
the road and that hope still remains unrealized.
With respect to the updated Q1 scorecard after this morning's
) and others, we now have Q1 results from 268 S&P 500 members
that combined account for almost 63.9% of the index's total
market capitalization. Total earnings for these 263 companies are
up +2.3% from the same period last year on +3.4% higher revenues,
with 67.5% beating EPS estimates and 48.1% coming out with
positive revenue surprises.
Compared to other recent quarters, the earnings growth
performance from these 268 companies is on the weak side (largely
due to the Finance sector), revenue growth and earnings beat
ratios are along historical levels, while the revenue beat ratios
are tracking lower. The growth picture improves a bit once the
Finance sector is excluded from the aggregate picture.
The fact that Q1 results have been less weak relative to
pre-season expectations tells us little about what to expect
about the coming quarters the outlook for which remains cloudy.
The persistently weak guidance from management teams is prompting
2014 Q2 estimate to come down and the pace of negative revisions
is likely to accelerate in the coming days as we move towards the
end of the Q1 earnings season. This is hardly the type of
earnings backdrop that will push stocks higher.
Director of Research
CUMMINS INC (CMI): Free Stock Analysis Report
COACH INC (COH): Free Stock Analysis Report
MERCK & CO INC (MRK): Free Stock Analysis
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