Friday, January 17, 2014
The Finance sector gave the Q4 earnings season a good-enough
start, but the picture emerging from the few non-financial
results thus far doesn't inspire much confidence. Results aren't
necessarily worse than what we have become accustomed to in
recent quarters. But given the recent improving economic
backdrop, investors have been hoping that companies will trump
the recent trend of negative guidance and start saying reassuring
things about the current and coming quarters. We are not getting
that and that's the disappointing part.
Including this morning's reports from
), we now have 2013 Q4 results from 51 S&P 500 members that
combined account for account for 15.7% of the index's total
membership. Total earnings for these 51 companies are up +15.1%,
with 56% coming ahead of consensus earnings expectations. Total
revenues are up +3.4% and 54% are beating top-line expectations.
For the Finance sector where results from 44.8% of the sector's
total market capitalization are already out as of this morning,
while earnings are up in double digits, thanks to easy
comparisons, fewer companies have come out with positive earnings
and revenue surprises.
Most of the results thus far pertain to the Finance sector and we
haven't seen any surprises there. It's relatively early, but the
handful of reports outside of Finance don't inspire much
confidence. Hard to put it any other way when looking at Thursday
evening's 'misses' from
) and this morning's lackluster
report. When we compare the results for the 51 companies with how
these same companies did in the last few quarters, the earnings
growth is better, the revenue growth is about the same, while
earnings beats are a bit on the light side and guidance still
With about 200 S&P 500 members reporting results next week,
we will be past the halfway mark by then and will have a good
sense of the Q4 earnings season. The 'headline' earnings growth
picture will likely remain the highest of the year and the total
earnings tally will most likely make another quarterly record.
But what everyone will be looking for is whether the tone and
quality of management guidance will get any better from what we
have become accustomed to in recent quarters. This has assumed
significance following the recent upgrade to the economic growth
My sense is that the preponderance of guidance will remain
negative, as has been the case for more than a year now. This
will keep downward pressure on estimates for the coming quarters.
Estimates have been consistently coming down for a while now, but
we used to unequivocal support from the Fed back then. It will be
interesting to see the market's reaction to negative estimate
revisions in the coming post-Taper world.
Director of Research
CSX CORP (CSX): Free Stock Analysis Report
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