Zacks Earnings Trends Highlights: Tiffany and Aeropostale

          Zacks Earnings Trends Highlights: Tiffany and Aeropostale

PR Newswire

CHICAGO, Jan. 11, 2013

CHICAGO, Jan. 11, 2013 /PRNewswire/ --"Zacks Director of Research Sheraz Mian
says the fourth quarter earnings season has started on a relatively favorable
note, but it's too early to draw any firm conclusions at this stage."

(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)

Positive Start to Q4 Earnings Season

The fourth quarter earnings season has started on a relatively favorable note,
perhaps indicating that expectations may have come down enough to make
positive surprises easier to come by. And the Tiffany (NYSE:TIF) and
Aeropostale (NYSE:ARO) news notwithstanding, we haven't seen that many
negative pre-announcements either. But it's way too early to make any
prediction at this stage as the bulk of the earnings season is ahead of us.

Total earnings for the 26 S&P 500 companies that have already reported results
as of Thursday January 10th are up 4.7% from the same period last year, with
57.7% of the companies beating expectations with a median surprise of +1.4%.
Revenues are up 3.5%, with 48% of the companies beating top-line expectations
and a median revenue surprise of +0.3%. This is better than what this same
group of companies did in the third quarter, when total earnings were down
5.9% and less than half of these 25 companies could beat earnings
expectations.

Combining the few earnings reports that have come out with the bulk of the
reports still to come, total fourth quarter earnings are expected to be up
+0.5% from the same period last year. This is a sharp drop from the +7.9%
growth expected in the quarter in late September, just before the third
quarter earnings season was getting underway. As was the case in the third
quarter (and practically every quarter before that), the actual growth rate
will most likely be better than these pre-season expectations, given
management teams' mastery of under-promising and over-delivering.

Ahead of the third quarter reporting season, the expectation was for earnings
in that quarter to be down 3.4%. While the actual earnings drop turned out to
be 'only' -0.1%, it was nevertheless the weakest earnings growth rate in
almost 12 quarters. And if the magnitude of outperformance in the fourth
quarter is comparable to the last four quarters, then the final growth tally
should be in the +2% vicinity. This would mean that corporate earnings were
essentially flat in the second half of 2012.

But this sub-par earnings growth trend is not expected to last long, or at
least that's what current consensus expectations mean. After another quarter
of weak results in the first quarter of 2013, earnings growth resumes in the
following quarter and ramps up materially in the back half of 2013. I have
been skeptical of those growth expectations for a while now, but that's
exactly what the market is pricing at present.

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