For Immediate Release
Chicago, IL – August 13, 2012 – Zacks Director of Research Sheraz Mian says, "While roughly two-thirds of companies beat earnings expectations, only 37.6% of the companies have beat revenue expectations."
Q2 Earnings Season Almost Over
The second quarter earnings season is almost over, with less than 10% of the companies still to report. Total earnings for the 455 S&P 500 companies that have already reported results (as of Thursday, August 9th) are up 4.4% from the same period last year, though the growth rate turns negative once Finance gets excluded. In addition to Finance’s heavy contribution to the aggregate growth picture, performance on the revenue front has been notably weak as well.
While roughly two-thirds of companies beat earnings expectations, the beat ratio on the revenue front is far weaker – only 37.6% of the companies have beat revenue expectations. Even some of these companies with positive revenue surprises for the second quarter have guided towards lower revenue numbers in the coming quarters. This does not bode well for growth in the coming quarters.
Finance became the growth leader, replacing Tech this quarter, while Energy has been a drag on growth and Basic Materials has the lowest ratio of positive surprises of all the sectors.
- The second-quarter 2012 reporting season is almost over, with reports from 455 S&P 500 companies -- 91% of the total -- already in. The reporting season has ended for companies in 9 of the 16 Zacks sectors.
- Total second quarter earnings for these 455 companies are up 4.4% from the same period last year, with easy comps in Finance driving most of the growth. These same companies had earnings growth of 8.7% in the first quarter. The 4.4% earnings growth reflects margin gains of 64 basis points and effectively flat revenues (down 0.1%).
- The ratio of companies beating earnings expectations is in-line with past performance, with 65.1% beating earnings expectations, with a median surprise of 2.8%. This compares to roughly 65.5% of these same companies beating expectations in the first quarter, with a median surprise of 3.5%.
- Positive revenue surprises were quite scarce, with only 37.6% of the companies coming ahead of top-line expectations, with a median surprise of a drop of 0.6%. Total revenues are down 0.1% for the 455 companies that have reported, which compares to top-line gains of 5.5% in the first quarter for those same companies. Excluding Energy, which has been notably weak this quarter, total S&P 500 revenues are up 3.1% vs. 5.8% in the first quarter.
- Finance is the primary driver of the earnings growth, with easy comps at Bank of America (BAC) particularly significant. Excluding Finance, total earnings would be down 1.5%, while the ex-Finance growth for that same cohort was 5.9% in the first quarter.
- Energy companies are a big drag on earnings this quarter, with total earnings for the group down 16% from the same period last year, which compares to a drop of 2.1% in the previous quarter.
- Excluding Energy, total earnings for the S&P 500 companies would be up 8.7%, while that same ex-Energy cohort had earnings growth of 10.7% in the first quarter.
- Total earnings for the Tech companies are up 8.4%, a sharp deceleration from the 23.3% growth that these same companies had in the first quarter. Excluding Apple (AAPL), Tech earnings growth the growth rate drops to 6%.
- The sector with the most negative surprises is Basic Materials, with total sector earnings down 19.2% and only 30.4% of the companies have beat.
- Total earnings for the 45 companies still to report second quarter results are expected to be down 0.2% in the second quarter, with Retail as the major slice of the still-to-report group. Outside of Retail, we do have a number of major (old) Tech companies like Dell (DELL), Hewlett-Packard (HPQ) and Cisco (CSCO) among the reports still to come.
- Full-year earnings for companies in the S&P 500 are expected to increase 7.3% this year and 8.2% next year. Half of the sixteen Zacks sectors will have double-digit earnings growth in 2012, with Finance, Tech and Construction showing strong gains, while Utilities and Energy are expected to be in the negative.
- The bottom-up ‘EPS’ estimates for 2012 and 2013 -- reflecting projections of analysts at brokerage firms covering individual companies -- currently stand at $101.30 and $109.65, respectively. The top-down estimates -- reflecting the projections of strategists at brokerage firms -- currently stand at $101.83 and $108.64 for 2012 and 2013, respectively.
Want stock picks from Zacks Equity Research that are based on earnings estimates? Subscribe to the free "Profit from the Pros" newsletter: http://at.zacks.com/?id=7160
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Len Zacks. The company continually processes stock reports issued by 3,000 analysts from 150 brokerage firms. It monitors more than 200,000 earnings estimates, looking for changes.
Then, when changes are discovered, they’re applied to help assign more than 4,400 stocks into five Zacks Rank categories: #1 Strong Buy, #2 Buy, #3 Hold, #4 Sell, and #5 Strong Sell. This proprietary stock-picking system continues to outperform the market by a nearly 3-to-1 margin.
The best way to unlock profitable Zacks' stock recommendations and market insights is through the free daily email newsletter: "Profit from the Pros." It provides a steady flow of profitable ideas GUARANTEED to be worth your time. Register for your free subscription at http://at.zacks.com/?id=5187
Follow us on Twitter: http://twitter.com/ZacksResearch
Join us on Facebook: http://www.facebook.com/ZacksInvestmentResearch
Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
Contact: Sheraz Mian
More From Zacks.com
- Investment & Company Information
- earnings growth