For Immediate Release
Chicago, IL – May 3, 2012 – Zacks Research Equity Strategist Sheraz Mian says that S&P 500 earnings for 1Q are impressive, largely thanks to Apple. He tracks companies on the Zacks.com web site, naming names, while forecasting trends for the months ahead.
Impressive 1Q (Thanks to Apple)
The first quarter 2012 earnings season has turned out to be way better relative to pre-season expectations. And with about two-thirds of the results already known, this reporting season is also shaping up to be better than the fourth quarter of 2011. Most of us suspected in the run up to the earnings season that the odds of disappointing results were lower, given the extremely low expectations. But hardly anyone of us could foretell how good the earnings season has turned out to be, particularly at this late stage of the earnings cycle.
Total earnings for the 67% of S&P 500 companies that have already reported are up 6.9% from the same period last year. Approximately 69% of the companies are coming ahead of expectations, with the median surprise at a very good 3.8%. At this stage in the previous quarter (4Q-11), total earnings for the same companies were up 5.5%. Approximately 62% of these companies beat expectations in the fourth quarter, with a median surprise of 2.3%.
Most of the earnings growth is coming from top-line gains, with margins essentially flat from the year-earlier level. Revenues for the companies that have already reported are up 5.7% year over year, though only 39.5% have come out with positive revenue surprises, with a median surprise of 1%.
As the Earnings Scorecard table below shows, the Tech and Finance sectors have been major growth drivers, though overall growth is fairly well dispersed, with half of the sixteen Zacks sectors showing double-digit earnings growth.
The outsized earnings growth number for Construction is largely a function of easier comparisons, as can be seen with results from PulteGroup ( (PHM - Analyst Report) and Weyerhaeuser Co. ( (WY - Analyst Report) . But Construction is a much smaller sector within the S&P 500, accounting for about 0.50% of the index’s market capitalization and expected to contribute less than 0.30% of its total earnings in 2012. Tech and Finance, on the other hand, account for 19.5% and 14.9% of the index’s market cap and will contribute 19.2% and 17.8% of its total earnings in 2012, respectively.
Blowout results from Apple (AAPL - Analyst Report) no doubt play a major role in the Tech sector’s strong performance. Excluding Apple’s results, the sector’s earnings growth drops to only 3.4% from the very impressive 21.8%. Earnings growth for the 67% of companies that have already reported drop to 3.8% from 6.9%, once Apple’s results are excluded.
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Contact: Sheraz Mian