Key Points:
-
With the bulk of the first-quarter 2012 reports already out, we can confidently say that this reporting season was not only better than expected, but also better than the preceding quarter.
-
With earnings reports from roughly 88% of the S&P 500 already out, total earnings are up 7.4% from the year-earlier period. Approximately 65% of the reported companies have beaten expectations, with a median earnings surprise of 3.5%.
-
The bulk of the earnings growth has come from top-line gains, with margins essentially flat. Total revenues for the companies that have reported are up 4.7% from the same period last year. However, fewer companies have been able to come out with positive revenue surprises -- only 38.7% of the companies have beaten revenue expectations, with a median revenue surprise of 0.9%.
-
At this stage in the fourth quarter, these same companies had reported a 6.6% increase in total earnings, with roughly 62% of companies beating expectations and a median surprise of 2.3%. Results from the Finance sector is the major difference between the first quarter and fourth quarter, with earnings growth of 18.7% this time compared to a 3.9% gain in the fourth quarter of 2011.
-
Technology and Finance have been the best growth sectors, with earnings growth of 21.2% and 18.7%, respectively. Half of the sixteen Zacks sectors have earnings growth in the double digits, while only five of those had double-digit gains at this stage in the fourth quarter of 2011.
-
The blowout numbers from Apple (AAPL - Analyst Report) - Analyst Report) explain a big part of the strong Tech sector earnings. Excluding Apple’s results, Tech’s earnings growth drops from 21.2% to 4.1%. Total first quarter earnings growth for the 88% of S&P 500 companies that have reported results drops to 4.9% from 7.4% once Apple’s earnings are excluded.
-
Expectations for the full year have improved since the start of the earnings season, with full-year 2012 earnings projected to grow by 10%, up from growth expectations of 9.4% at the start of the reporting season. Growth is expected to continue into next year, with 2013 earnings expected to grow by 12.5%.
-
The bottom-up ‘EPS’ estimates for 2012 and 2013, reflecting projections of analysts at brokerage firms covering individual companies, currently stand at $103.75 and $117.10, respectively. The top-down estimate for 2012 and 2013, reflecting the projections of strategists at brokerage firms, currently stand at $103.12 and $111.50 for 2012 and 2013, respectively.
Strong Earnings Season
The first quarter 2012 earnings season has turned out to be way better relative to pre-season expectations. And with the bulk of the results now known, this reporting season has also proven to be better than the fourth quarter of 2011. Most of us suspected in the run up to the earnings season that the odds of disappointing results were lower, given the extremely low expectations. But hardly anyone of us could foretell how good the earnings season has turned out to be, particularly at this late stage of the earnings cycle.
Total earnings for the 88% of S&P 500 companies that have already reported are up 7.4% from the same period last year. Approximately 65% of the companies are coming ahead of expectations, with the median surprise at a very good 3.5%. At this stage in the previous quarter (4Q-11), total earnings for the same companies were up 6.6%. Approximately 62% of these companies beat expectations in the fourth quarter, with a median surprise of 2.3%.
Most of the earnings growth is coming from top-line gains, with margins essentially flat from the year-earlier level. Revenues for the companies that have already reported are up 4.7% year over year, though only 38.7% have come out with positive revenue surprises, with a median surprise of 0.9%.
As the Earnings Scorecard table below shows, the Tech and Finance sectors have been major growth drivers, though overall growth is fairly well dispersed with half of the sixteen Zacks sectors showing double-digit earnings growth.
Blowout results from Apple (AAPL - Analyst Report) - Analyst Report) no doubt play a major role in the Tech sector’s strong performance. Excluding Apple’s results, the sector’s earnings growth drops to only 3.4% from the very impressive 21.8%. Earnings growth for the 88% of companies that have already reported drop to 4.9% from 7.4%, once Apple’s results are excluded.
Here is the scorecard of how the first quarter reporting season has turned out thus far:
|
The Scorecard - Q1 Reported Results
|
|---|
| Zacks Sectors | % Reported | Earnings Growth Q1 YoY | Earnings % Beat | Earnings % Surprise | Revenue Growth Q1 YoY | Revenue % Beat | Revenue % Surprise |
| Consumer Staples | 81.1% | 1.7% | 70.0% | 3.4 | 2.8% | 42.0% | 0.4 |
| Cons. Discretionary | 93.3% | 8.1% | 67.9% | 4.5 | 9.6% | 35.8% | 1.3 |
| Retail/Wholesale | 52.1% | 8.7% | 84.0% | 2.7 | 4.3% | 48.9% | 1 |
| Medical | 91.1% | -0.7% | 68.3% | 2.5 | 4.4% | 44.0% | 1.4 |
| Auto | 100.0% | -19.3% | 75.0% | 7.7 | 4.1% | 31.3% | 0.8 |
| Basic Materials | 100.0% | -10.1% | 73.9% | 3.9 | 5.3% | 32.6% | 1 |
| Industrial Products | 81.8% | 10.8% | 77.8% | 3.2 | 10.0% | 34.3% | 0.3 |
| Construction | 100.0% | 128.1% | 63.6% | 4.6 | 17.0% | 38.1% | 2.2 |
| Conglomerates | 100.0% | 19.7% | 100.0% | 8.1 | 0.3% | 35.7% | 0.8 |
| Computer and Tech | 80.0% | 21.2% | 69.6% | 4.8 | 12.9% | 42.3% | 1.3 |
| Aerospace | 100.0% | 13.6% | 66.7% | 6.9 | 8.3% | 33.3% | 1.6 |
| Oils and Energy | 97.6% | -4.9% | 43.9% | -1.8 | 4.4% | 31.0% | 0.4 |
| Finance | 98.7% | 18.7% | 67.5% | 4.3 | 1.7% | 46.6% | 1.6 |
| Utilities | 95.1% | -6.0% | 41.0% | 0 | -0.7% | 17.5% | -0.1 |
| Transportation | 100.0% | 23.5% | 66.7% | 9.1 | 8.7% | 33.3% | 0.2 |
| Business Services | 89.5% | 15.6% | 55.6% | 1.2 | 7.2% | 48.5% | 0.9 |
| S&P 500 | 88.20% | 7.4% | 65.3% | 3.5 | 4.7% | 38.7% | 0.9 |
Expectations Remain Low
Estimates have started going up a little in recent days, though they still remain quite low relative to what we have seen thus far this season.
Most of the remaining companies still to report results are in the retail sector, though we do have a number notable tech companies such as Dell (DELL - Analyst Report) - Analyst Report) and Cisco (CSCO - Analyst Report) - Analyst Report) coming out with results as well. Many important retail players such as Wal-Mart (WMT - Analyst Report) - Analyst Report), Home Depot (HD - Analyst Report) - Analyst Report) and Target (TGT - Analyst Report) - Analyst Report) still have to report results. In total, these 59 S&P 500 companies are expected to show an earnings drop of 1.9% from the year-earlier level. A major contributor to the negative growth expectation is Dell, which is expected to see earnings decline from the year-earlier level.
The first quarter is expected to be the low point in terms of earnings growth this year, with a meaningful ramp-up apparent in current growth expectations for the second quarter and the rest of the year.
|
Growth Expected - Total Net Income
|
|---|
| Zacks Sectors | 2Q-12E
YoY | 2Q-12E
QoQ | 1Q-12A YoY
| 1Q-12A QoQ | 4Q-11A
YoY
| 2011A
YoY | 2012A
YoY | 2013A
YoY |
| Consumer Staples | -2.3% | 13.4% | 1.7% | -10.3% | 4.6% | 9.2% | 4.1% | 9.70% |
| Consumer Discretionary | -3.5% | 1.5% | 8.1% | -22.6% | 16.1% | 20.1% | 11.7% | 16.80% |
| Retail/Wholesale | 4.5% | -10.3% | 8.7% | 9.0% | -0.3% | 11.3% | 12.6% | 13.20% |
| Medical | -4.0% | -2.4% | -0.7% | 6.4% | 1.2% | 8.0% | 1.8% | 7.10% |
| Auto | -24.8% | 0.2% | -19.3% | 38.4% | -7.3% | 6.8% | 8.2% | 17.10% |
| Basic Materials | -14.1% | -1.3% | -10.1% | 60.8% | -12.4% | 30.5% | 1.0% | 20.30% |
| Industrial Products | 11.6% | 14.1% | 10.8% | 2.2% | 16.9% | 37.3% | 14.9% | 14.20% |
| Construction | 25.5% | 72.7% | 128.1% | -25.3% | 63.3% | -4.6% | 39.1% | 39.90% |
| Conglomerates | 7.3% | 1.5% | 19.7% | 0.4% | -75.2% | 7.0% | 16.2% | 13.70% |
| Computer and Tech | 4.4% | 0.1% | 21.2% | -13.9% | 30.0% | 22.8% | 14.8% | 13.90% |
| Aerospace | -8.4% | -4.8% | 13.6% | -14.5% | 10.5% | 11.5% | -2.4% | 11.60% |
| Oils and Energy | -12.8% | 4.4% | -4.9% | 3.9% | 4.0% | 35.9% | -1.5% | 10.60% |
| Finance | 49.5% | -11.8% | 18.7% | 35.3% | 25.3% | 4.3% | 28.4% | 13.70% |
| Utilities | -10.1% | -6.1% | -6.0% | 29.8% | -0.6% | 4.3% | -6.0% | 9.90% |
| Transportation | 10.8% | 23.0% | 23.5% | -14.7% | 16.2% | -2.8% | 16.8% | 15.20% |
| Business Services | 11.3% | 6.7% | 15.6% | -6.7% | 12.4% | 19.7% | 13.4% | 13.40% |
| S&P 500 | 3.8% | -1.2% | 7.4% | 5.7% | 8.6% | 15.2% | 10.0% | 12.50% |
Revenue Driving Growth
While the year-over-year top-line growth has been respectable in the quarter, positive revenue surprises have been on the lower side relative to recent quarters. The best performer again was Tech, which with sizable help from Apple, had a 12.9% revenue growth. Tech’s top-line is expected to continue into the second quarter, with growth expected to be 7.9% at present. For the full year, Tech is expected to produce revenue gains of 8.2%.
Aggregate revenue growth is expected to be flat in the second quarter, but ramp up in the back half of the year, with full-year gains of 5.1%. Revenues are expected to increase an additional 4.9% in 2013. Given revenue’s strong correlation with nominal global GDP, a lot will be riding with the growth outlook for the world economy.
|
Growth Expected - Total Revenue
|
|---|
| Zacks Sectors | 2Q-12E
YoY | 2Q-12E
QoQ | 1Q-12A YoY
| 1Q-12A QoQ | 4Q-11A
YoY
| 2011A
YoY | 2012A
YoY | 2013A
YoY |
| Consumer Staples | -10.0% | -1.8% | 2.8% | -9.9% | 5% | 7.4% | -5.9% | 4.1% |
| Consumer Discretionary | 3.2% | 2.5% | 9.6% | -7.6% | 12% | 12.3% | 5.7% | 5.4% |
| Retail/Wholesale | 6.6% | 2.5% | 4.3% | -4.3% | 10% | 6.6% | 6.8% | 4.8% |
| Medical | 1.5% | 0.2% | 4.4% | -0.1% | 4% | 5.5% | 8.1% | 5.0% |
| Auto | 0.4% | 4.0% | 4.1% | -3.3% | 11% | 18.3% | 1.8% | 7.1% |
| Basic Materials | 1.2% | 4.3% | 5.3% | 4.7% | 8% | 18.2% | 6.3% | 6.0% |
| Industrial Products | 9.7% | 9.1% | 10.0% | -1.4% | 13% | 19.9% | 9.1% | 7.6% |
| Construction | 11.5% | 12.1% | 17.0% | -2.6% | 12% | 4.2% | 12.1% | 11.0% |
| Conglomerates | 3.1% | 3.9% | 0.3% | -4.4% | -2% | 3.7% | 3.9% | 7.0% |
| Computer and Tech | 7.9% | 2.7% | 12.9% | -8.5% | 14% | 13.7% | 8.2% | 9.0% |
| Aerospace | 4.0% | 1.2% | 8.3% | -6.3% | 1% | -1.1% | 3.7% | 2.6% |
| Oils and Energy | -7.9% | -4.8% | 4.4% | -0.1% | 14% | 22.0% | -2.3% | 3.0% |
| Finance | -1.0% | -5.7% | 1.7% | 7.8% | -10% | -3.1% | 0.8% | 3.9% |
| Utilities | 5.1% | 2.5% | -0.7% | 0.3% | 4% | 3.3% | 4.9% | 3.5% |
| Transportation | 5.4% | 6.3% | 8.7% | -2.8% | 11% | 12.6% | 7.2% | 7.5% |
| Business Services | 3.5% | 2.3% | 7.2% | -4.2% | 9% | 9.2% | 4.7% | 5.7% |
| S&P 500 | 0.4% | -0.1% | 4.7% | -1.5% | 6% | 9.0% | 5.1% | 4.9% |
Note: Data in this report, unless stated otherwise, is through the morning of Tuesday 5/8/2012.
We use the convention of referring to the next full fiscal year to be completed as 2012, but not all firms are on December fiscal years, this can cause discontinuities in the data. The data is based on FY1, not based on 2012, even though we may call it 2012 in the report. All numbers, including historical ones, reflect the current composition of the S&P 500, thus some historical numbers may differ from those reported by S&P which are based on the composition of the index at the time of the reports.
RELATED ARTICLES
Playing the Pullback: Optimism vs. Patience
Strategies for "Tough Times"
Can't Cut Through the Greece
tooltip here...
This page is temporarily not available. Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext. 9339.
Strong Earnings Season
The first quarter 2012 earnings season has turned out to be way better relative to pre-season expectations. And with the bulk of the results now known, this reporting season has also proven to be better than the fourth quarter of 2011. Most of us suspected in the run up to the earnings season that the odds of disappointing results were lower, given the extremely low expectations. But hardly anyone of us could foretell how good the earnings season has turned out to be, particularly at this late stage of the earnings cycle.
Total earnings for the 88% of S&P 500 companies that have already reported are up 7.4% from the same period last year. Approximately 65% of the companies are coming ahead of expectations, with the median surprise at a very good 3.5%. At this stage in the previous quarter (4Q-11), total earnings for the same companies were up 6.6%. Approximately 62% of these companies beat expectations in the fourth quarter, with a median surprise of 2.3%.
Most of the earnings growth is coming from top-line gains, with margins essentially flat from the year-earlier level. Revenues for the companies that have already reported are up 4.7% year over year, though only 38.7% have come out with positive revenue surprises, with a median surprise of 0.9%.
As the Earnings Scorecard table below shows, the Tech and Finance sectors have been major growth drivers, though overall growth is fairly well dispersed with half of the sixteen Zacks sectors showing double-digit earnings growth.
Blowout results from Apple (AAPL - Analyst Report) - Analyst Report) no doubt play a major role in the Tech sector’s strong performance. Excluding Apple’s results, the sector’s earnings growth drops to only 3.4% from the very impressive 21.8%. Earnings growth for the 88% of companies that have already reported drop to 4.9% from 7.4%, once Apple’s results are excluded.
Here is the scorecard of how the first quarter reporting season has turned out thus far:
Expectations Remain Low
Estimates have started going up a little in recent days, though they still remain quite low relative to what we have seen thus far this season.
Most of the remaining companies still to report results are in the retail sector, though we do have a number notable tech companies such as Dell (DELL - Analyst Report) - Analyst Report) and Cisco (CSCO - Analyst Report) - Analyst Report) coming out with results as well. Many important retail players such as Wal-Mart (WMT - Analyst Report) - Analyst Report), Home Depot (HD - Analyst Report) - Analyst Report) and Target (TGT - Analyst Report) - Analyst Report) still have to report results. In total, these 59 S&P 500 companies are expected to show an earnings drop of 1.9% from the year-earlier level. A major contributor to the negative growth expectation is Dell, which is expected to see earnings decline from the year-earlier level.
The first quarter is expected to be the low point in terms of earnings growth this year, with a meaningful ramp-up apparent in current growth expectations for the second quarter and the rest of the year.
Revenue Driving Growth
While the year-over-year top-line growth has been respectable in the quarter, positive revenue surprises have been on the lower side relative to recent quarters. The best performer again was Tech, which with sizable help from Apple, had a 12.9% revenue growth. Tech’s top-line is expected to continue into the second quarter, with growth expected to be 7.9% at present. For the full year, Tech is expected to produce revenue gains of 8.2%.
Aggregate revenue growth is expected to be flat in the second quarter, but ramp up in the back half of the year, with full-year gains of 5.1%. Revenues are expected to increase an additional 4.9% in 2013. Given revenue’s strong correlation with nominal global GDP, a lot will be riding with the growth outlook for the world economy.
Note: Data in this report, unless stated otherwise, is through the morning of Tuesday 5/8/2012.
We use the convention of referring to the next full fiscal year to be completed as 2012, but not all firms are on December fiscal years, this can cause discontinuities in the data. The data is based on FY1, not based on 2012, even though we may call it 2012 in the report. All numbers, including historical ones, reflect the current composition of the S&P 500, thus some historical numbers may differ from those reported by S&P which are based on the composition of the index at the time of the reports.
RELATED ARTICLES
Playing the Pullback: Optimism vs. Patience
Strategies for "Tough Times"
Can't Cut Through the Greece
Get the full Analyst Report on WMT - FREE
Get the full Analyst Report on TGT - FREE
Get the full Analyst Report on HD - FREE
Get the full Analyst Report on DELL - FREE
Get the full Analyst Report on CSCO - FREE
Get the full Analyst Report on AAPL - FREE