Zacks Earnings Preview: Oracle, FedEx, AIG and Bank of America
CHICAGO, March 25, 2013
CHICAGO, March 25, 2013 /PRNewswire/ --Zacks.com releases the list of
companies likely to issue earnings surprises. This week's list includes Oracle
(Nasdaq:ORCL), FedEx (NYSE:FDX), AIG (NYSE:AIG) and Bank of America
To see more earnings analysis, visit http://at.zacks.com/?id=3207.
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A Breather Before Q1 Earnings Deluge
The first quarter earnings season has gotten underway, though it will take a
few more weeks for the reporting cycle to get into high gear. The initial
reports from the likes of Oracle (Nasdaq:ORCL) and FedEx (NYSE:FDX) have been
disappointing, but it's perhaps premature to extrapolate that to the rest of
the reporting season. We have 43 companies reporting quarterly results this
week, including 8 S&P 500 members.
As has been the case at the start of recent quarterly earnings cycles,
expectations for the first quarter earnings season remain quite low. Total
earnings for companies in the S&P 500 are expected to be down 2.8% from the
same period last year. This would compare to actual earnings growth of 2% in
the fourth quarter.
Tough comparisons account for the bulk of the weak growth outlook for the
first quarter – the first quarter of 2012 still remains the highest point for
quarterly earnings since the start of this earnings cycle in 2009.
Compared to the preceding quarter, the key variance is in the expectations for
the Finance and Tech sectors. Total Finance sector earnings are expected to
drop 3.2%, after the 10.3% gain the quarter before and many quarters of
double-digit earnings growth.
The primary reason for Finance's weakness in Q1 is the unfavorable comparison
– the first quarter of 2012 was the strongest quarter for the sector since
2009. In absolute dollar terms, the Finance sector's profitability level in
the first quarter of 2013 is the second best after the first quarter of 2012.
The unfavorable comparison aspect is particularly pronounced for AIG
(NYSE:AIG) and Bank of America (NYSE:BAC). Excluding these two companies,
total Finance sector earnings would be down 0.4% in the quarter.
Investors don't seem to be overly concerned about lack of earnings growth in
the first quarter as they are looking ahead to the resumption of growth later
this year. The consensus view is that earnings growth in the first half of
2013 will be roughly equivalent to the growth pace in the second half of 2012
– of about 1%. But they are looking for double-digit earnings growth in the
back half of 2013 and full-year 2014. And as long as that outlook remains
intact, they will remain content with a weak growth pace in the first quarter.
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