Looking Ahead to Q1 Earnings Season - Earnings Preview

It will be a few more weeks before the first quarter reporting cycle gets into high gear, but the earnings season will actually get underway this week. Alcoa ( AA ) typically gets credit for kick-starting each earnings season, but that's not really accurate -- the 'official' earnings season generally gets underway before Alcoa's report comes out.

And that's exactly what will happen this earnings season as well. Before Alcoa's first quarter 2013 earnings report comes out on April 8th, we will have seen first quarter earnings reports from a host of companies, including such bellwethers like FedEx ( FDX ), Oracle ( ORCL ), Nike ( NKE ), and others that will start reporting this week. We have 75 companies reporting quarterly results this week, including 14 S&P 500 companies.

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 -3.9% from the same period last year. This would compare to actual earnings growth of +2% in the fourth quarter. The key variance between the first quarter and preceding quarter is in the expectations for the Finance and Tech sectors.

Finance has been a key driver of earnings growth over the last several quarters. Total earnings growth for the S&P 500 in the fourth quarter of 2012 drops from +2% to +0.5% when Finance is excluded from the index's results. But Finance earnings are expected to drop -9.8% in the first quarter from the same period last year following the +10% growth in the fourth quarter. Earnings in the Tech and Energy sectors are expected to be down -4.6% (vs. +1.3% in Q4) and -8.9% (vs. +3.6% in Q4), respectively.

Stepping back from these expectations and taking a big-picture view of earnings, it becomes clear that earnings growth has been essentially flat, particularly outside of Finance, since the second quarter of 2012. This underwhelming trend carries into the first quarter, but we start getting a rebound from the second quarter onwards and a material ramp-up in the back half of the year.

What this means is that the market expects the first quarter of 2013 to serve as an earnings growth bottom. Current consensus expectations put earnings growth in the second quarter at +3.7%, in the third quarter at +7%, and an impressive +13% in the last quarter of the year.

What this means is that the market is looking for double-digit earnings growth in the back half of the year, which continues into 2014. And if these expectations have to come through, then we need corporate managements to shed light on how and where the growth will come from. It has been a while since we have seen uplifting guidance from management teams as a majority of the companies providing guidance over the last two quarters guided lower. Guidance is always key, but it is even more important this time around given how strong expectations are for the rest of the year.

Earnings aside, we have the Fed meeting and Bernanke press conference this week where everyone will be looking for clues to the Fed's future course of action following the recent string of positive looking economic data. I don't think we will find anything new from the official post-meeting FOMC statement or the press conference, but the FOMC member forecasts may provide some signs of how the Fed officials see the economy's current trajectory. Other key economic data coming out this week includes Housing Starts and Existing Home sales.

Monday - 3/18

  • We will get the March Homebuilder Sentiment Index after the market opens, with expectations of the index increasing to 47 from February's 46 level.
  • No major earnings reports come out today.

Tuesday - 3/19

  • We will get the February Housing Starts and Permits data in the morning and the two-day FOMC meeting will get underway. Starts are expected to increase to 913K from last month's 890K level.
  • Factset Research ( FDS ) is the only major report in the morning, while Adobe Systems ( ADBE ), Cintas ( CTAS ) and Williams Sonoma ( WSM ) will report after the close.

Wednesday - 3/20

  • The focus today will be on the Fed, with the post-FOMC statement and forecasts coming out in the afternoon, followed by the Bernanke press event.
  • On the earnings front, we will get results from FedEx ( FDX ), General Mills ( GIS ) and Lennar ( LEN ) in the morning, while Oracle ( ORCL ) and Jabil Circuit ( JBL ) will report after the close.

Thursday - 3/21

  • In addition to weekly Jobless Claims, we will get Existing Home sales, Leading Indicators and the Philly Fed survey.
  • It will be interesting to see whether the weekly Jobless Claims numbers this morning confirms the positive momentum from the last two weeks.
  • Dollar General ( DG ) and Ross Stores ( ROST ) are the major reports in the morning, while Nike ( NKE ) will report after the close.

Friday - 3/22

  • We will get earnings reports from Darden Restaurants ( DRI ) and Tiffany ( TIF ) in the morning; there is nothing on the economic docket.

Here is a list of 75 companies reporting this week, including 14 from the S&P 500:

Company Ticker Current Qtr Year-Ago Qtr Last EPS Surprise % Report Day Time
AASTROM BIOSCI ASTM -0.23 -0.2 8.33 Monday N/A
ACORN ENERGY IN ACFN -0.2 -0.1 -5 Monday AMC
AMERESCO INC-A AMRC 0.09 0.18 -31.82 Monday BTO
AROTECH CORP ARTX 0.02 -0.07 160 Monday AMC
CELSION CORP CLSN -0.17 -0.18 5.88 Monday BTO
CHARM COMM-ADR CHRM 0.05 0.37 -100 Monday AMC
CHIPMOS TEC LTD IMOS 0.28 0.04 2.27 Monday BTO
CUMULUS MEDIA CMLS 0.05 -0.07 66.67 Monday BTO
CYTOMEDIX INC CMXI -0.03 0 -100 Monday AMC
DEX ONE CORP DEXO -0.42 0.11 0 Monday BTO
FUTUREFUEL CORP FF 0.22 0.26 20 Monday AMC
HASTING ENTMT HAST 0.26 -0.61 3.92 Monday BTO
HORIZON PHARMA HZNP -0.47 -3.91 28.81 Monday BTO
HOUSTON WIRE&CB HWCC 0.21 0.17 -17.24 Monday BTO
INSMED INC INSM -0.31 -0.28 -8.57 Monday BTO
KIOR INC-A KIOR -0.32 -0.15 -4 Monday BTO
NUMEREX CP-CL A NMRX 0.06 0.05 0 Monday BTO
PARKERVISION PRKR -0.06 -0.06 0 Monday AMC
PERMA-FIX ENVIR PESI 0.01 0.01 -200 Monday BTO
PERNIX THERAPTC PTX 0.05 0.16 -133.33 Monday BTO
ROCKWELL MED RMTI -0.44 -0.49 -75.51 Monday AMC
STERLING CONSTR STRL 0.04 0.17 -95.24 Monday BTO
TITAN PHARMA TTNP 0.19 -0.05 -200 Monday BTO
TOWERSTREAM CP TWER -0.11 -0.04 -11.11 Monday AMC
TRAVELCENTERS TA -0.11 -0.09 6.45 Monday BTO
US ENERGY CP-WY USEG 0 0.01 -200 Monday BTO
UTSTARCOM HLDGS UTSI -0.01 0.03 100 Monday BTO
AAR CORP AIR 0.44 0.41 7.32 Tuesday AMC
ADOBE SYSTEMS ADBE 0.2 0.42 6.52 Tuesday AMC
CINTAS CORP CTAS 0.62 0.58 0 Tuesday AMC
DSW INC CL-A DSW 0.72 0.51 14.61 Tuesday BTO
FACTSET RESH FDS 1.12 1.05 2.7 Tuesday BTO
FRANCESCAS HLDG FRAN 0.3 0.19 9.09 Tuesday AMC
FRANCO NV CP FNV 0.36 0.28 6.67 Tuesday AMC
RENTECH INC RTK 0.03 -0.04 200 Tuesday BTO
RENTECH NITROGN RNF 0.81 0.57 27.12 Tuesday BTO
SAVIENT PHARM SVNT -0.47 -0.44 -24.44 Tuesday BTO
STAR BULK CARRS SBLK -0.47 -0.6 18.6 Tuesday BTO
WALTER INV MGMT WAC 0.53 0.05 -100 Tuesday BTO
WILLIAMS-SONOMA WSM 1.28 1.17 8.89 Tuesday AMC
ACTUANT CORP ATU 0.37 0.43 -2 Wednesday BTO
CLARCOR INC CLC 0.46 0.46 2.86 Wednesday AMC
FEDEX CORP FDX 1.38 1.55 -1.42 Wednesday BTO
GENL MILLS GIS 0.57 0.55 8.86 Wednesday BTO
GUESS INC GES 0.86 1.05 -2.27 Wednesday AMC
HERMAN MILLER MLHR 0.28 0.26 -10.26 Wednesday AMC
JABIL CIRCUIT JBL 0.46 0.48 12.77 Wednesday AMC
LENNAR CORP -A LEN 0.14 0.08 30.23 Wednesday BTO
LUBY'S INC LUB 0.05 0.05 12.5 Wednesday AMC
NEVSUN RESOURCS NSU 0.12 0.23 37.5 Wednesday AMC
ORACLE CORP ORCL 0.63 0.58 3.45 Wednesday AMC
PAC SUNWEAR CAL PSUN -0.16 -0.19 25 Wednesday AMC
TEARLAB CORP TEAR -0.1 -0.14 9.09 Wednesday BTO
AETERNA ZENTARS AEZS -0.36 -0.42 20.45 Thursday AMC
ALIMERA SCIENCE ALIM -0.25 -0.19 15 Thursday AMC
CATO CORP A CATO 0.28 0.35 14.29 Thursday BTO
CTPARTNERS EXEC CTP 0 -0.64 33.33 Thursday N/A
DOLLAR GENERAL DG 0.9 0.85 5 Thursday BTO
IHS INC-A IHS 0.44 0.43 12.35 Thursday BTO
KB HOME KBH -0.22 -0.51 -50 Thursday BTO
LULULEMON ATHLT LULU 0.74 0.51 5.41 Thursday BTO
MARCUS CORP MCS 0 0.07 20 Thursday BTO
MET-PRO CORP MPR 0.16 0.15 35.71 Thursday BTO
MICRON TECH MU -0.2 -0.25 -42.11 Thursday AMC
NIKE INC-B NKE 0.68 0.6 14 Thursday AMC
RESPONSE GENETC RGDX -0.06 -0.2 28.57 Thursday BTO
ROSS STORES ROST 1.07 0.85 0 Thursday BTO
RUE21 INC RUE 0.63 0.52 2.5 Thursday N/A
SILVER WHEATON SLW 0.49 0.41 -15 Thursday AMC
TIBCO SOFTWARE TIBX 0.11 0.15 0 Thursday AMC
WET SEAL INC -A WTSL -0.06 0.03 15.38 Thursday AMC
WORTHINGTON IND WOR 0.49 0.38 12.2 Thursday BTO
DARDEN RESTRNT DRI 1.01 1.25 0 Friday BTO
TIFFANY & CO TIF 1.37 1.39 -22.22 Friday 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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