For Immediate Release
Chicago, IL – October 31, 2012 – "Zacks Director of Research, Sheraz Mian, says with earnings from 63.5% of total S&P 500 earnings in the third quarter, we have seen enough to make an informed judgment about this reporting season."
Q3 Earnings: Beyond the Halfway Mark
We are past the halfway mark in third quarter reporting season, with results from 289 companies in the S&P 500 -- 57.8% of the index’s total membership -- already known as of Tuesday, October 30th. With earnings from these 289 companies accounting for 63.5% of total S&P 500 earnings in the third quarter, we have seen enough to make an informed judgment about this reporting season.
It has been a fairly weak earnings season any way you look at it. And as we had suspected all along, earnings estimates for the fourth quarter and beyond have started coming down, though they still have room to go on the down side.
Total earnings for these 289 companies are down 2.5% from the same period last year, with 62.3% of the companies beating earnings expectations. The performance on the revenue side is not much different, with total revenues down 1.9% and only 36.7% of the 289 companies are able to beat revenue expectations.
The growth rates look even weaker when Finance is excluded from the aggregate numbers. Excluding Finance, total earnings and revenues are down 4.4% and 2.4% from the same period last year, respectively.
The Tech sector is standing out for its weakness this time around, as reports from a host of bellwethers show. The 65.2% of Tech sector companies that have already reported results account for 76.1% of the sectors’ total third quarter earnings. Total earnings for these Tech companies are down 0.7% from the same period last year, which compares to 7.7% positive growth rate for the same group in the second quarter.
The third-quarter 2012 reporting season is beyond the half-way mark, with results from 289 companies in the S&P 500 already out. Overall results are weaker than what these companies produced in recent quarters.
Total earnings for these companies are down 2.5% from the same period last year, with only 62.3% of the companies beating earnings expectations. Total revenues are down 1.9%, though only 36.7% of the companies have come out with positive revenue surprises.
Unlike recent quarters, results from the Tech sector have been disappointing as reports from Amazon ((AMZN - Free Report) ), Google (), Apple ((AAPL - Free Report) ) and Intel ((INTC - Free Report) ) show. Total Tech earnings are down 0.7%, with only 57.8% beating earnings expectations -- a significantly weaker performance than we have been seeing from the sector in recent quarters.
The Finance sector has the best performance thus far, though the subdued earnings growth rate for the sector (up 5.2%) is solely due to the negative comparison for Bank of America ((BAC - Free Report) ).
Basic Materials is the weakest, both in terms of growth as well as negative surprises. Energy still has a number of reports still to come, but it has the weakest growth profile after Basic Materials.
The composite earnings growth rate, combining the reports that have come out with those still to come, for the third quarter is for a decline of 0.7% for the S&P 500 as a whole and a decline of 4.5% excluding Finance.
The composite Tech sector earnings growth rate is for a decline of 0.2% from the same period last year, a major reversal of the persistent strong growth for a long time. Excluding Apple, which accounts for about 20% of the sector’s earnings, total Tech sector earnings would be down 4.8% vs. positive 2.1% growth in the second quarter.
Unlike expectations for the third quarter, estimates for the following quarter remain quite strong, though they have started coming down in recent days. Total earnings expected to be up 4.9% in the fourth quarter at present, which is a drop from the 7%-plus growth rate expected just a few weeks back.
Net margins are modestly up in the aggregate, but declining once Finance is excluded. Ten of the 16 sectors are expected to see margins contract in the third quarter, including Tech.
Total earnings for the full years 2012 and 2013 are expected to be up 5.6% and 10.6%, respectively. Revenues are expected to be essentially flat this year (up only 0.1%), but up 4% in 2013.
Want stock picks from Zacks Equity Research that are based on earnings estimates? Subscribe to the free "Profit from the Pros" newsletter: https://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: https://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 https://at.zacks.com/?id=5187
Follow us on Twitter: http://twitter.com/ZacksResearch
Join us on Facebook: http://www.facebook.com/ZacksInvestmentResearch
Visit https://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