The fourth quarter reporting season is underway, and we have results from 27 companies in the S&P 500 already (as of Friday, November 11th). The pace of reporting accelerates this week, though we don’t get into the heart of the earnings season till the week after.
We will get fourth quarter earnings results from 69 companies, including 37 from the S&P 500. The earnings reports thus far have been relatively improved, but after more than a tenth of the earnings reports out by the end of the week, we will have a better sample size to evaluate how this earnings season is unfolding.
The performance of the 27 companies that have already reported are better in all respects compared to what these same companies did in the third quarter. The growth rate is higher, more companies are beating, and the median surprise is higher -- both for earnings and revenues.
But with 95% of the reports still to come, the more important story on the earnings front pertains to expectations from the coming reports. And there has been no letup in the downward adjustments to those expectations. Last week’s foreclosure related banking settlement caused further negative revisions to estimates to a number of banks, particularly Bank of America (BAC). The Zacks Consensus estimate for Bank of America fell from 19 cents to 2 cents last week, a roughly $2 billion swing in earnings.
This week’s earnings reports are heavily weighted towards Finance, with all the major banks coming out with fourth quarter results. We got solid earnings and revenue beats from Wells Fargo (WFC) due to its strong mortgage franchise, but the bank’s net interest margin (NIM) remained under pressure.
This means that other banks with smaller mortgage businesses will be even more at the mercy of the unfavorable NIM backdrop. We’ll know more this week, as Bank of America, JPMorgan (JPM), Citigroup (C) and many of the other major regional banks like US Bancorp (USB) and BB&T (BBT) report results, but expectations for Finance sector earnings have come down.
Total fourth quarter earnings for the Finance sector, which a few days back were expected to be up +9.7%, are now expected to be up only +2%. As a result, total earnings for the 473 S&P 500 companies that have still to report results are now expected to be down -1.2% from the same period last year.
The composite expected growth rate, where we combine the 27 companies that have reported results with the 473 still to come, is now +0.2%. The composite revenue growth rate is for a drop of -1.2%. Finance aside, we have a few major Tech companies like Intel (INTC) and eBay (EBAY) reporting, but that sector’s big guns will be coming out the following week.
Earnings will be the focus, but we have a fair number of key economic reports on deck as well, ranging from Retail Sales and CPI to Housing Starts.
Monday - 1/14
- We don’t have much on the economic or earnings calendar today, with the only significant earnings report in the morning from specialty chemicals maker PPG Industries (PPG).
Tuesday - 1/15
- We will have the December Retail Sales numbers in the morning, with consensus expectation of +0.2% increase on the headline following the +0.3% gain in November. We will also the December PPI and January Empire State Index in the morning.
- Homebuilder Lennar Corp (LEN) will report in the morning.
Wednesday - 1/16
- We will get the December CPI, Industrial Production and Homebuilder Sentiment Index coming out today. The CPI is expected to remain unchanged at the ‘headline’ level and increase by +0.1% on the ‘core.’ The homebuilder sentiment index is expected to modestly increase from November’s 47 level.
- We have busy earnings day, with JPMorgan (JPM) and Goldman Sachs (GS) reporting results in the morning, while eBay (EBAY) reports after the close.
- Zacks ESP or Earnings Surprise Prediction, our proprietary leading indicator of earnings surprises, is showing Goldman and eBay coming out with earnings beats.
Thursday - 1/17
- In addition to weekly Jobless Claims, we will get the December Housing Starts and the January Philly Fed Index reports. Housing Starts are expected to increase to 883K from November’s 861K level, while the Philly Fed is expected to modestly lose ground from the prior month’s level.
- We will get results from Bank of America (BAC) and Citigroup (C) in the morning, while Intel (INTC) will report after the close.
Friday - 1/18
- We will get the preliminary University of Michigan Sentiment Survey in the morning, with expectations of a modest increase from month’s 72.9 level.
- General Electric (GE) and Schlumberger (SLB) are the major reports, both in the morning.
Here is a list of the 69 companies reporting this week, including 37 S&P 500 members:
|Company||Ticker||Current Qtr||Year-Ago Qtr||Last EPS Surprise %||Report Day||Time|
|MATERIAL SCI CP||MASC||0.21||0.34||-40||Monday||BTO|
|PPG INDS INC||PPG||1.53||1.3||1.36||Monday||BTO|
|FOREST LABS A||FRX||-0.13||1.04||-16||Tuesday||BTO|
|LENNAR CORP -A||LEN||0.43||0.16||25.93||Tuesday||BTO|
|LINEAR TEC CORP||LLTC||0.4||0.4||0||Tuesday||AMC|
|PINNACLE FIN PT||PNFP||0.33||0.17||10||Tuesday||AMC|
|BANK OF NY MELL||BK||0.54||0.48||16.67||Wednesday||BTO|
|BOSTON PRIV FIN||BPFH||0.17||0.14||11.76||Wednesday||AMC|
|EL PASO PIPELIN||EPB||0.55||0.51||10||Wednesday||AMC|
|FIRST REP BK SF||FRC||0.73||0.68||2.86||Wednesday||BTO|
|KINDER MORG ENG||KMP||0.67||0.55||0||Wednesday||AMC|
|AMER EXPRESS CO||AXP||1.05||1.04||0||Thursday||AMC|
|ASML HOLDING NV||ASML||0.77||1.13||0||Thursday||BTO|
|ASSOC BANC CORP||ASBC||0.26||0.23||4||Thursday||AMC|
|BANK OF AMER CP||BAC||0.02||0.15||-100||Thursday||BTO|
|CAPITAL ONE FIN||COF||1.63||0.89||16||Thursday||AMC|
|FIFTH THIRD BK||FITB||0.42||0.33||0||Thursday||BTO|
|PEOPLES UTD FIN||PBCT||0.19||0.17||0||Thursday||AMC|
|PNC FINL SVC CP||PNC||1.56||1.39||1.86||Thursday||BTO|
|TESSCO TECH INC||TESS||0.56||0.59||33.33||Thursday||AMC|
|FIRST HRZN NATL||FHN||0.17||0.13||-5.56||Friday||BTO|
|STATE ST CORP||STT||1||0.93||3.13||Friday||BTO|
|WEBSTER FINL CP||WBS||0.49||0.43||4.35||Friday||BTO|