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Ahead of Wall Street

Wednesday, November 6, 2013

With not much on the economic calendar today, the buzz surrounding the Twitter IPO is adding to the overall positive momentum in the market. The IPO will get priced after the close today and the stock will make its public debut Thursday morning. It will be interesting to see if this hot IPO will fare better than how the Facebook (
(FB - Analyst Report)) IPO was handled some time back.

Twitter mania aside, another go-go stock, Tesla Motors (
(TSLA - Analyst Report)), will also be in the spotlight today after the electric car maker’s results after the close on Tuesday failed to satisfy elevated investor expectations. The disappointment is putting the stock on track to give back some of its more than 400% year-to-date gain in today's session. On this morning’s earnings docket, the outlook from Humana ((HUM - Analyst Report)) was weak while the same from Ralph Lauren ((RL - Analyst Report)) was positive, while Whole Foods ((WFM - Analyst Report)) and Qualcomm ((QCOM - Analyst Report)) will report after the close.

Including results from Humana, Ralph Lauren, Chesapeake and others this morning, we now have Q3 results from 423 S&P 500 members or 84.6% of the index’s total membership. Total earnings for these 423 companies are up +4.4%, with 66.2% coming ahead of consensus earnings expectations. Total revenues are up +3% and 51.3% are beating top-line expectations. The composite earnings growth rate for Q3, combining the results for the 423 companies that have reported with the 77 still to come, is +4.2%, up from +3.7% in Q2.

Unlike in Q2 when the Finance sector was solely responsible for keeping aggregate earnings growth in the positive column, the Q3 gains are fairly broadly distributed. Total earnings growth outside of Finance at this late stage in the reporting cycle remains at +3.2% compared to a decline of -3.3% at comparable stage in Q2 and the 4-quarter average of -1%. Aggregate growth stays positive after we exclude the strong gains from big operators like Bank of America (
(BAC - Analyst Report)), Google (), Microsoft ((MSFT - Analyst Report)) and others.

With total earnings at an all-time record already, this better distributed growth performance helps improve the earnings picture and modestly blunt the impact of persistent negative guidance from management teams.
 
Sheraz Mian
Director of Research

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