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 firstname.lastname@example.org or call 800-767-3771 ext. 9339.
For Immediate Release
Chicago, IL – June 20, 2012 – Zacks Director of Research Sheraz Mian explains how expectations continue to come down for the 2nd quarter.
Setting the Table Ahead of 2Q
Getting ready for the start of the second-quarter 2012 reporting season. Expectations continue to come down, with total earnings expected to increase 2.1% from the same period last year. This growth expectation is down from roughly double that rate two months ago as the first quarter reporting season was getting into high gear. This growth expectation reflects 0.6% growth in revenue and a 13-basis point expansion in net margins.
The Finance sector accounts for most of the second quarter growth, with earnings in the sector expected to be up 41.6% in the quarter despite the massive trading hit to J.P. Morgan’s ((JPM - Analyst Report)) earnings. Excluding Finance, total earnings in the second quarter of 2012 will be down 4% from the same period last year.
Tech earnings are expected to increase by only 1.8% -- a sharp deceleration from the persistent double-digit quarterly growth trend of recent quarters. This compares to growth of 13.6% in the first quarter. Excluding Apple ((AAPL - Analyst Report)), Tech earnings are expected to be down 4.2% in the second quarter. Tech revenue is expected to up 5.1% in the second quarter, after the 9.9% gain in the first quarter. Excluding Apple, Tech revenues are expected to be up 2% in the second quarter following a 5% gain in the first quarter.
Full-year earnings for companies in the S&P 500 are expected to total $977.5 billion in 2012 and approximately $1.1 trillion in 2013, representing growth rates of 9.6% and 12.4% for 2012 and 2013, respectively. This compares to growth of 15.2% in 2011 and 44.9% in 2010. Nine of the sixteen Zacks sectors will have double-digit earnings growth in 2012, with Finance expected to grow 26.4%, Tech 14.3% and Construction 40.6%. The weakest sectors are Utilities (down 6.2%) and Energy (down 1.4%).
Total revenues are expected to increase 3.4% in 2012 and 4.6% in 2013, after gains of 9% and 8.1% in 2011 and 2010, respectively. Construction is the only sector with a double-digit revenue growth this year, with Industrial Products in the high single digits.
The best of the margin expansion trend is now firmly behind us, with second quarter margins expected to be down by 10 basis points sequentially. However, aggregate margins are expected to expand by an additional 30 basis points in the second quarter. Keep in mind, however, that only 7 of the 16 Zacks sectors will have positive year-over-year margin comparisons, with Finance as the biggest positive driver. Excluding Finance, the year-over-year margin comparison turns negative.
For the full-year 2012, margins are expected to increase 57 basis points, with Finance as the biggest contributor to the expansion and five sectors experiencing contracting margins. Excluding Finance, margins would be up a much more modest 12 basis points this year.
The bottom-up ‘EPS’ estimates for 2012 and 2013, reflecting projections of analysts at brokerage firms covering individual companies, currently stand at $103.30 and $116.16, respectively. The top-down estimate for 2012 and 2013, reflecting the projections of strategists at brokerage firms, currently stand at $102.97 and $110.00 for 2012 and 2013, respectively.
Expectations Still Coming Down
Earnings expectations for the second quarter and full-year 2012 have continued to come down even as results in the first quarter came significantly better than expected. Total earnings are expected to increase 2.1% in the second quarter from the same period last year, a growth rate that is less than half of the pace expected three months back. Total earnings are expected to be up 9.6% in 2012 and 12.5% in 2013.
The 2.1% growth expected for the second quarter reflects 0.6% higher revenues and a 13 basis point expansion in net margins. Finance is the primary growth driver in the second quarter, despite the earnings hit at J.P. Morgan due to the trading loss. Excluding Finance, second quarter earnings growth will be down 3.6% from the same period last year. Finance is also a major contributor to the full-year earnings growth.
Half of the sixteen Zacks sectors are expected to have negative year-over-year earnings growth comparisons in the second quarter, while only five sectors had negative earnings growth in the first quarter. Earnings growth at Staples, Discretionary and Aerospace turns negative in the second quarter.
Earnings in the Tech sector are expected to decelerate sharply from the persistent quarterly trend of double-digit growth rates and increase by only 1.8% in the second quarter. This compares to growth of 13.6% in the first quarter. Excluding Apple, Tech earnings are expected to be down 4.2% in the second quarter.
Keep in mind that Apple will single-handedly account for 21.5% of all Tech sector earnings in the second quarter, while Apple’s earnings will be 4.1% of the entire S&P 500 earnings in the quarter. For the full year 2012, Apple’s earnings account for 23.2% of all Tech sector earnings and 4.5% of S&P 500 earnings. In terms of market cap, however, the tech giant accounts for 4.3% of the index’s market cap, bigger than 9 of the 16 Zacks sectors.
Want stock picks from Zacks Equity Research that are based on earnings estimates? Subscribe to the free "Profit from the Pros" newsletter: http://at.zacks.com/?id=7160
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5186
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Len Zacks. The company continually processes stock reports issued by 3,000 analysts from 150 brokerage firms. It monitors more than 200,000 earnings estimates, looking for changes.
Then, when changes are discovered, they’re applied to help assign more than 4,400 stocks into five Zacks Rank categories: #1 Strong Buy, #2 Buy, #3 Hold, #4 Sell, and #5 Strong Sell. This proprietary stock-picking system continues to outperform the market by a nearly 3-to-1 margin.
The best way to unlock profitable Zacks' stock recommendations and market insights is through the free daily email newsletter: "Profit from the Pros." It provides a steady flow of profitable ideas GUARANTEED to be worth your time. Register for your free subscription at http://at.zacks.com/?id=5187
Follow us on Twitter: http://twitter.com/ZacksResearch
Join us on Facebook: http://www.facebook.com/ZacksInvestmentResearch
Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
Contact: Sheraz Mian