Markets Stay Closed, Some Earnings Delays


Markets remain closed for a second day on Tuesday due to Hurricane Sandy, with published accounts putting the preliminary estimates of the storm’s total cost at close to $20 billion. In addition to insured losses, this cost estimate would include damage to power lines and other infrastructure.

The estimated insured losses of $5 billion to $10 billion will put Sandy in the Top 10 category of most expensive hurricanes in the country’s history. Last year’s Hurricane Irene cost the insurance industry in excess of $4 billion. Given the relatively uneventful hurricane season this year before this storm, the insurance industry is in fairly good shape to absorb Sandy-related losses.

While it’s quite early at this stage, the storm will likely have some stimulative economic effects for the region as well, as homeowners, businesses and local governments repair storm damage in the coming days. The net effect on the retail sector may have been a wash, with heavy sales ahead of the storm offsetting the impact of the shutdowns.

In the ongoing third quarter earnings season, a number of companies scheduled to report results today had to delay the announcements. Major companies in this category include Automatic Data Processing (ADP), Avon Products (AVP), Cummins (CMI), Pfizer (PFE). But many others are sticking to their published schedules and coming out with third quarter results. The better-than-expected results from Ford (F) and Archer Daniels Midland (ADM) this morning would fall in that category. Ford’s results are particularly impressive, with North American strength offsetting European weakness, resulting in a top- and bottom-line beat.

As of this morning, we have third quarter results from 285 companies in the S&P 500, or 57% of the index’s total membership. Total earnings for these 285 companies are down 2.4% from the same period last year, with 62.8% of the companies beating earnings expectations. Total revenues are down 2.1% from the same period last year, with only 37.2% of the companies coming out with positive revenue surprises.

Excluding Finance, total earnings and revenues are down 4.3% and 2.7%, respectively. The composite growth rate for the third quarter, where we combine the reported results with those still to come out, is for a decline of 0.7% (down 4.6% excluding Finance).

Estimates for the fourth quarter and beyond have started to come down as companies have guided lower, but they still remain elevated. Total earnings in the fourth quarter are expected to be up 4.9%, which is down from almost 8% before the third quarter reporting season got underway.

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