With roughly half of corporate America having now reported earnings for the fourth quarter, John Butters, senior earnings analyst at Factset, says the results are coming in solid, but falling well short of inspiring.
In the attached clip Butters says 70% of companies are beating EPS estimates. That's impressive until taking into account that it's almost exactly the average outcome of the last five years. As a matter of course, companies keep expectations lower than the internal forecast with the goal of scoring the coveted "earnings beat."
More encouraging is the 67% of firm's beating the Street's expectations on the top line. For the last 12 months companies have been able to wring more profits out of disappointing revenues. Butters notes that a mere 41% of corporate America beat on revenues for last 6 months of 2012. 67% is average for the long term, but much better than what has been seen of late.
"So far at this point and time companies are performing very well versus estimates," Butters concludes in the attached video.
The best single sector has been the Financials (XLF). Butters says the Financial sector is showing a 13% growth rate, and that it's even better than it seems. Ex-Insurance companies that are taking a beating from hurricane payouts, financial firms are posting a stunning 38% growth rate. That's generally up against weak expectations but traders will take what they can get.
The laggards are Telecom Services(IYZ) and Industrials which Butters says are being hit by subsidies for product and weakness abroad, respectively.
The theme thus far has been somewhat disappointing growth but good performance against expectations. The earnings may not justify the market's ramp since December, but revenues and earnings are coming in at what passes for "normal" compared to expectations.
As for as stocks are concerned, that's good enough for now, if not forever.
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- John Butters