For Immediate Release
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Looking Ahead to Q1 Earnings Season
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.
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