Thursday, July 17, 2014
Stocks today appear on track to open modestly lower after making steady gains in the last couple of sessions. This morning’s data docket hasn’t been helpful either, with a number of mixed earnings reports adding to a soft housing read.
Today’s housing data came on the weak side, with both Starts and Permits coming shy of expectations for a second month in a row, confirming that that housing recovery has lost some of its mojo. Starts remained under the one million mark in June, on an annualized seasonally adjusted basis and the May numbers were revised down to under the one-million level as well. Starts for single-family homes dropped 9% while multi-family structures 11.3%.
Housing Permits, a leading indicator of future demand, dropped 4.2% in June. The only positive in this otherwise weak report was the single-family permits which increased at 2.6% in June, the best growth pace in almost 6 months.
On the earnings front, this morning’s busy docket of reports included strong reports from Morgan Stanley (MS - Analyst Report) and UnitedHealth (UNH - Analyst Report), while AutoNation (AN - Analyst Report), Grainger (GWW - Analyst Report) and Mattel (MAT - Analyst Report) didn’t impress with their numbers. Sherwin-Williams (SHW - Analyst Report) missed Q2 results, but guided higher for the current and coming quarters.
We will see results from IBM (IBM - Analyst Report) and Google (GOOG) after the close today. The Q2 Scorecard after this morning’s reports shows results from 66 S&P 500 members that combined account for 18% of the index’s total market capitalization.
Total earnings for these 66 companies are up +5.5% from the same period last year on +4.2% higher revenues, with 68.2% beating EPS estimates and 55.2% coming out with positive revenue surprises. The earnings and revenue growth performance from these 66 companies compares favorably to what we saw from the same group of companies in the preceding quarter. Compared to the average for the four quarters through 2014 Q1, the earnings growth rate and beat ratios are roughly in-line, while the revenue performance is modestly better.
We still have plenty of reports to go, but the earnings cycle has gotten off to a positive start. This should put more confidence into estimates for the current and following quarters.
Director of Research