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Zacks Earnings Trends Highlights: Bank of America, Exxon, Chevron, Conoco and Apple

For Immediate Release


Chicago, IL – July 30, 2012 – Director of Research Sheraz Mian says second quarter earnings have turned out to be quite decent -- not strong or good, but better relative to pre-season expectations.



Revenue Weakness a Major Issue

The second quarter earnings season has turned out to be quite decent -- not strong or good, but better relative to pre-season expectations.

With results from 292 S&P 500 companies available at this stage (as of Friday, July 27th), total earnings are up 5.4% 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 67.1% of the companies have beat earnings expectations, the beat ratio on the revenue front is far weaker -- only 36.6% of the companies have beaten 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.

Key Points

  • The second-quarter 2012 reporting season is in full swing and the earnings picture does not appear to be as bad as earlier feared. We have reports from 292 S&P 500 companies, or 58.4% of the total already in.
  • Total earnings for these 292 companies are up 5.4% from the same period last year, with easy comps in Finance driving most of the growth. These same companies had earnings growth of 8.3% in the first quarter. The 5.4% earnings growth margin gains of 107 basis points, offsetting a 0.6% decline in revenues.
  • The ratio of companies beating earnings expectations is in-line with past performance, with 67.1% beating earnings expectations, with a median surprise of 2.8%. This compares to roughly 69.9% of these same companies beating expectations in the first quarter, with a median surprise of 4.1%.
  • 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 6.5% in the first quarter.
  • Energy companies are a big drag on earnings this quarter, as declining profits at Exxon (XOM), Chevron (CVX) and Conoco (COP) this week show. Total Energy sector earnings are down 16.4% from the same period last year, which compares to 0.6% positive earnings growth in the previous quarter. Excluding Energy, total earnings for the S&P 500 companies that have reported would be up 10%, while that same ex-Energy cohort had earnings growth of 9.8% in the first quarter.
  • Total earnings for the Tech companies are up 6.9%, a sharp deceleration from the 21% growth that these same companies had in the first quarter. Excluding Apple (AAPL), Tech earnings growth the growth rate drops negative 3.2%.

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Contact: Sheraz Mian

Company: Zacks.com

Phone: 312-265-9211

Email: pr@zacks.com

Visit: www.Zacks.com

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