Back to top

Economic Highlights

January 7: Focus Likely to Shift to Earnings

 ZacksTrade Now

With nothing much on the economic calendar this week, the market’s attention will likely shift to the fourth quarter earnings season which gets under way with Alcoa’s (AA) report after the close on Tuesday. The reporting season gets into high gear next week as the big banks report results, but a number of major companies including Wells Fargo (WFC) and Monsanto (MON) will come out with fourth quarter results this week.

All indicators are pointing towards another underwhelming earnings season, not much different from what we saw in the third quarter reporting cycle. But while expectations for fourth quarter earnings have been steadily coming down in recent weeks, investors appear unwilling to bring down estimates for 2013 as they hold on to hopes of a ramp in corporate profitability in the coming quarters. Guidance from management teams on earnings calls is always very important, but it is particularly important this reporting season given the lofty-looking earnings expectations for 2013.

Total earnings in the fourth quarter are expected to be up +0.4% from the same period last year. This is a sharp drop from the +7% earnings growth rate that consensus expected just three months ago. Overall, ten of the 16 Zacks sectors will have negative earnings growth, with even the Tech sector experiencing earnings decline of -3.5% (Tech sector earnings were barely in the positive column in the preceding quarter). The Construction sector has the best earnings growth profile off all sectors, a function of the positive momentum in the housing sector. Total earnings in the Construction sector are expected to up +33.3% in the fourth quarter. The only other sector with double-digit earnings growth this quarter is Business Services.

The key question at this stage is whether the stock market momentum can be sustained in the face of negative momentum on the estimate revisions front. The bulls point towards the attractiveness of equities relative to other asset classes and pin their hopes on an expanding market multiple and declining risk premiums. May be the bulls a point, but it will still pay to stay focused on the evolving earnings picture in the coming days.

 

 

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
UTD THERAPE… UTHR 117.83 +28.51%
TRIQUINT SE… TQNT 20.67 +6.52%
RF MICRO DE… RFMD 12.47 +6.04%
VASCO DATA… VDSI 14.77 +4.68%
BANCO DO BR… BDORY 15.53 +3.95%