The fourth quarter earnings season hasn't been that eventful
thus far even though we have results from 67 S&P 500 companies
already (as of Friday, January 18th). The reason is that
expectations for this earnings season were set by the very weak
third quarter reporting season. Given those low expectations, the
actual performance is a tad bit better relative the third quarter,
though it remains sub-par relative to the last 6 to 8 quarters.
Total earnings for the 67 S&P 500 companies that have already
reported results are up +15.6% from the same period last year, with
59.7% of the companies beating expectations with a median surprise
of +2.3%. Revenues are up +5.8%, with 40.3% of the companies
beating top-line expectations and a median revenue surprise of +1%.
All of that growth is coming from the Finance sector, with strong
earnings growth at
) more than offsetting the weakness from
Bank of America
). Excluding Finance, total S&P 500 earnings are essentially
flat (up only +0.1%).
Combining the reports that have come out with the bulk of the
reports still to come, the composite fourth quarter earnings growth
rate is up +1.5%. The actual dollar amount of fourth quarter
earnings is the lowest quarterly total in 2012. But the expectation
is for earnings growth to resume from the second quarter of 2013
and increase materially in the back half of the year.
I have been skeptical of those growth expectations for awhile now,
but that's exactly what the market is pricing at present. We have
started expectations for 2013 come down a bit, but there is likely
much more room to go.
- Total earnings for the 67 S&P 500 companies that have
already reported results are up +15.6% from the same period last
year, with 59.7% of the companies beating expectations with a
median surprise of +2.3%. Total revenues are up +5.8%, with 40.3%
of the companies beating expectations and a median surprise of
1%. The beat ratios and median surprises are comparable to the
third quarter, but remain below historical levels.
- Finance is the key driver of earnings growth thus far, given
the sector's heavy representation among the early reporters.
Strong earnings performance from
) has helped the sector's earnings grow by 32.1% from the same
period last year. Excluding Finance, total earnings growth for
the reports that have come out is essentially flat (up only
- Total earnings for the 433 companies that have still to
report results are expected to be down -2.5%, with the remaining
Finance and Tech companies accounting for most of the
- On the Tech side,
) are expected to see earnings declines, while
) will see only modest gains. Of the remaining Finance companies,
insurance companies are expected to have earnings declines.
- Combining the results that have come out with those still to
come, the composite earnings growth rate for the fourth quarter
is +1.5%, which compares to a flat reading in the third quarter
(down -0.1%). Excluding Finance, the composite fourth quarter
earnings growth rate drops to a decline of -0.2%, compared to the
decline of -4.1% for the ex-Finance group in the third
- The Basic Materials sector is expected to have +8.6% higher
earnings this quarter after back-to-back negative earnings growth
in the last four quarters. The growth improvement in this
economically sensitive sector is primarily due to easy
comparisons as the overall backdrop remains challenging.
- The low earnings growth trend is expected to carry over into
the first quarter of 2013, but expectations are for significant
improvement thereafter, particularly in the second half of
- Net margins are modestly up year over year, but down
sequentially. Half of the 16 Zacks sectors are expected to see
margins contract in the quarter, including Tech. But margins are
expected to improve back up in the first quarter.
- For the full-year 2013, total earnings are expected to
increase by +8.3% after the +2.7% gain in 2012. Total earnings
are expected to be up +11.3% in 2014.
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Q4 Earnings Largely Uneventful Thus Far
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