A Breather Before Q1 Earnings Deluge - Earnings Preview

The first quarter earnings season has gotten underway, though it will take a few more weeks for the reporting cycle to get into high gear. The initial reports from the likes of Oracle ( ORCL ) and FedEx ( FDX ) have been disappointing, but it's perhaps premature to extrapolate that to the rest of the reporting season. We have 43 companies reporting quarterly results this week, including 8 S&P 500 members.

As has been the case at the start of recent quarterly earnings cycles, expectations for the first quarter earnings season remain quite low. Total earnings for companies in the S&P 500 are expected to be down 2.8% from the same period last year. This would compare to actual earnings growth of 2% in the fourth quarter.

Tough comparisons account for the bulk of the weak growth outlook for the first quarter - the first quarter of 2012 still remains the highest point for quarterly earnings since the start of this earnings cycle in 2009.

Compared to the preceding quarter, the key variance is in the expectations for the Finance and Tech sectors. Total Finance sector earnings are expected to drop 3.2%, after the 10.3% gain the quarter before and many quarters of double-digit earnings growth.

The primary reason for Finance's weakness in Q1 is the unfavorable comparison - the first quarter of 2012 was the strongest quarter for the sector since 2009. In absolute dollar terms, the Finance sector's profitability level in the first quarter of 2013 is the second best after the first quarter of 2012. The unfavorable comparison aspect is particularly pronounced for AIG ( AIG ) and Bank of America ( BAC ). Excluding these two companies, total Finance sector earnings would be down 0.4% in the quarter.

The 5.1% decline in Tech sector earnings is relatively broader based, but is still heavily concentrated in Apple ( AAPL ), Intel ( INTC ) and Seagate Technology ( STX ), partly offset by strength at Microsoft ( MSFT ). But even if we exclude these four companies from the Tech sector's first quarter tally, earnings growth would still be negative at -2.3%.

Investors don't seem to be overly concerned about lack of earnings growth in the first quarter as they are looking ahead to the resumption of growth later this year. The consensus view is that earnings growth in the first half of 2013 will be roughly equivalent to the growth pace in the second half of 2012 - of about 1%. But they are looking for double-digit earnings growth in the back half of 2013 and full-year 2014. And as long as that outlook remains intact, they will remain content with a weak growth pace in the first quarter.

But it will likely get harder to stick to that outlook if companies can't provide reassuring guidance for the rest of this year. We haven't seen much positive guidance over the last two quarters, but will companies to do a bit better this time around if current expectations for the remainder of the year have to hold up.

For a detailed look at first quarter expectations, please click here .

Monday - 3/25

Tuesday - 3/26

  • We have a busy day on the economic calendar, with February's Durable Goods Orders, January's Case-Shiller Home Price Index, and February's New Home Sales reports coming out in the morning. Also coming out today is the Conference Board's March Consumer Confidence, which is expected to decline from February's 69.6 level.
  • The 'headline' Durable Goods Orders are expected to be up +4.6% after the 4.9% decline in January. New Home Sales are expected to pullback from January's 437K seasonally adjusted annualized rate.
  • The Children's Place ( PLCE ) is the only notable earnings report in the morning, while SAIC ( SAI ), the defense/intelligence contractor, reports after the close.
  • Zacks ESP is showing The Children's Place coming out with a positive earnings surprise, while the signal for SAIC is not strong enough.

Wednesday - 3/27

  • We will get the February Pending Home Sales data in the morning after the market opens.
  • On the earnings front, we will get results from Paychex ( PAYX ), PVH Corp ( PVH ), and Red Hat ( RHT ), all after the close.

Thursday - 3/28

  • In addition to weekly Jobless Claims, we will get the March Chicago PMI and the third read on Q4 GDP.
  • The Jobless Claims data has been moving the favorable direction lately, with the 4-week average now at its lowest level since the recovery got underway. It will be interesting to see if this positive trend gets further confirmation from the claims data this morning.
  • The Q4 GDP is expected to be revised higher from 0.1% to 0.6%, while the Chicago PMI is expected to remain comparable to February's 56.5 level.
  • BlackBerry ( BBRY ), legally still called Research In Motion, Game Stop ( GME ), The Mosaic Company ( MOS ) are the major earnings reports today, all in the morning.
  • Zacks ESP is showing BlackBerry coming out with a positive earnings surprise, though the bigger issue with this company is the outlook for its new smart-phone.

Friday - 3/29

  • We will get the February Personal Income & Outlays report in the morning even though the market is closed for the Good Friday.

Here is a list of 43 companies reporting this week, including 8 from the S&P 500:

Company Ticker Current Qtr Year-Ago Qtr Last EPS Surprise % Report Day Time
APOLLO GROUP APOL 0.18 0.58 35.56 Monday BTO
AURICO GOLD INC AUQ 0.07 0.08 N/A Monday AMC
GOL LINHAS-ADR GOL -0.22 0.19 -129.17 Monday AMC
JA SOLAR HOLDGS JASO -1.32 -0.6 15 Monday BTO
SONIC CORP SONC 0.05 0.03 0 Monday AMC
ALEXZA PHARMACT ALXA -0.46 -1.2 13.33 Tuesday AMC
BACTERIN INTL BONE -0.04 -0.08 -20 Tuesday AMC
CHILDRENS PLACE PLCE 1.04 0.87 0 Tuesday BTO
ENVIVIO INC ENVI -0.18 999 0 Tuesday AMC
LANDEC CORP LNDC 0.18 0.18 43.75 Tuesday AMC
MATTRESS FIRM MFRM 0.31 0.22 2.44 Tuesday AMC
METABOLIX INC MBLX -0.28 -0.28 4.17 Tuesday AMC
NEOGEN CORP NEOG 0.28 0.22 0 Tuesday BTO
OFS CAPITAL CRP OFS 0.27 999 N/A Tuesday BTO
SAIC INC SAI 0.52 0.31 -2.94 Tuesday AMC
ADCARE HLTH SYS ADK 0.02 -0.14 -57.14 Wednesday AMC
CHINAEDU CP-ADR CEDU 0.12 0.03 -9.09 Wednesday AMC
EXFO INC EXFO 0.01 0.03 100 Wednesday AMC
EXONE CO/THE XONE 0.07 999 N/A Wednesday AMC
FIVE BELOW INC FIVE 0.38 999 200 Wednesday AMC
PAYCHEX INC PAYX 0.39 0.37 0 Wednesday AMC
PROGRESS SOFTWA PRGS 0.17 0.2 -42.86 Wednesday AMC
PVH CORP PVH 1.5 1.18 2.18 Wednesday AMC
RED HAT INC RHT 0.21 0.2 0 Wednesday N/A
SARATOGA RESRCS SARA 0.08 0.39 -150 Wednesday BTO
STEELCASE INC SCS 0.19 0.14 0 Wednesday AMC
TEXAS INDS TXI -0.4 -0.87 -5.88 Wednesday AMC
UNIFIRST CORP UNF 1.12 0.96 15.79 Wednesday BTO
VERASTEM INC VSTM -0.38 999 -41.67 Wednesday BTO
ACCENTURE PLC ACN 0.97 0.97 1.92 Thursday BTO
BRIGUS GOLD CP BRD 0.04 0.01 33.33 Thursday N/A
COMMERCIAL METL CMC 0.2 0.24 64.71 Thursday BTO
FINISH LINE-CLA FINL 0.75 0.81 -100 Thursday BTO
FREDS INC FRED 0.19 0.27 -14.29 Thursday BTO
GAMESTOP CORP GME 2.09 1.73 18.75 Thursday BTO
MOSAIC CO/THE MOS 0.9 0.72 7.14 Thursday BTO
PC-TEL INC PCTI 0.1 0.06 33.33 Thursday AMC
RESEARCH IN MOT BBRY -0.29 0.8 37.14 Thursday BTO
SIGNET GRP PLC SIG 2.09 1.79 16.22 Thursday BTO
TRANZYME INC TZYM -0.26 -0.33 44.83 Thursday AMC
TRI POINTE HOME TPH 0.19 999 N/A Thursday AMC
UTI WORLDWIDE UTIW 0.14 0.2 -33.33 Thursday BTO
WINNEBAGO WGO 0.16 -0.03 188.89 Thursday BTO

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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