Q4 Earnings Season Slowing Down

We still have plenty of Q4 earnings reports to come, but the bulk of the earnings season is now behind us, with results from 342 S&P 500 companies already out as of Friday, February 1. Please note that these 342 companies are more than just 68.4% of the index’s total membership – they account for 77.1% of the index’s total market capitalization and bring in 78.6% of all Q4 earnings.

This week brings in Q4 earnings results from 367 companies, including 52 S&P 500 members. This includes industry leaders like Cisco (CSCO), Coke (KO), Pepsi (PEP), Comcast (CMCSA), Whole Foods (WFM), and many others.

By the end of this week, we will have Q4 earnings reports from 394 S&P 500 companies that together account for 86.3% of the index’s total market capitalization. The Retail sector will be the only group by the end of the week that will have more than half of its Q4 results still awaited (retailers typically have fiscal Q4 period ends in January).

The reality of the Q4 earnings season is that it has turned out to be not as bad as many of us suspected. Leaving aside anemic earnings growth, on most other metrics the fourth quarter reporting season is quite good. Not only are the ratio and magnitude of surprises better than the previous quarter and comparable to the last many, but the tone of management guidance has also been on the reassuring side.

Total earnings for the 342 S&P 500 companies that have come out with Q4 results are up +2.8% from the same period last year, with 67% of the companies beating expectations with a median surprise of +3.3%. Total revenues are up +2.7%, with 63.5% of the companies beating revenue expectations.

The aggregate revenue picture is a bit distorted by the roughly $32 billion positive year-over-year swing in Prudential Financial (PRU) revenue, even though it missed both on the top and bottom lines in an otherwise noisy quarter for the insurer. Excluding Prudential, total revenues would be up 1% from the same period last year.

Excluding Finance as a whole, total earnings are down -0.3%, while total revenues are flat. The composite growth rate for Q4, where we combine the reports that have come out with those still to come, is +1.8% for earnings and +2.2% for total revenues (up +1.7% ex-Finance).

Expectations for the coming quarters have started coming down, but they still represent a meaningful improvement from what we saw in 2012. Total earnings are expected to be -3.1% in the first quarter, +3.9% in the second quarter, +7% in the third quarter and +14.3% in the fourth quarter of 2013. For full years, total earnings are expected to be +6.9% in 2013 and 11.8% in 2014.

(For a detailed look on how the fourth quarter earnings season has fared thus far, please check out our weekly Earnings Trends report.)

Monday - 2/11

• Nothing on the economic calendar.
• The key earnings reports include Loews Corp (L) in the morning and Masco (MAS) and Lions Gate Entertainment (LGF) after the close.

Tuesday - 2/12

• Nothing major on the economic calendar today.
• Coke (KO), Goodyear Tire (GT), Avon (AVP), Fossil (FOSL) and Michael Kors (KORS) will be reporting results, all in the morning.
• Zacks ESP, our proprietary leading indicator of earnings surprises, is showing KORS and FOSL coming out with earnings beats.

Wednesday - 2/13

• We will get the January Retail Sales data in the morning, with expectations of +0.1% gain (excluding autos) after the +0.3% (ex-autos) gain in December. This will be the first Retail Sales data after the payroll tax hike took effect and it would be instructive to see if we can see any negative impact in the numbers.
• Deere & Company (DE), Dr. Pepper (DPS), Comcast (CMCSA) and Dean Foods (DF) are the key reports in the morning, while Cisco (CSCO) and Whole Foods Market (WFM) report after the close.
• Zacks ESP is showing Comcast and Whole Foods coming out with positive earnings surprises.

Thursday - 2/14

• We will get the weekly Jobless Claims numbers in the morning, with expectations of modest drop from last week’s 366K level.
• Pepsi (PEP), Apache (APA) and Borg Warner (BWA) will report in the morning, while Agilent (A) and CBS Corp (CBS) will report after the close.

Friday - 2/15

• We will get the February Empire State Index, the January Industrial Production, and the preliminary February University of Michigan Consumer Sentiment data in the morning.
• JM Smucker (SJM), Campbell Soup (CPB) and Ventas (VTR) are the major reports today, all in the morning.
• Zacks ESP is showing SJM and VTR coming out with positive earnings surprises.

Here is a list of the 367 companies reporting this week, including 52 S&P 500 members: