Zacks Earnings Trends Highlights: FedEx, Bank of America, AIG, Apple and Intel
CHICAGO, April 9, 2013
CHICAGO, April 9, 2013 /PRNewswire/ --Director of Research Sheraz Mian says
growth expectations remain weak -- a reflection of touch comparisons and
underwhelming management guidance.
Q1 Earnings Season Takes the Spotlight
Economic data was in the forefront last week, and it overwhelmingly came out
short of expectations. The focus this week shifts to the first quarter
earnings season, which has been underway for the last few weeks but gets into
high gear next week.
It has been mixed bag thus far, with negative surprises from the likes of
FedEx (NYSE:FDX). But it would be premature to extrapolate the performance of
the 22 Q1 results onto the entire earnings season.
Growth expectations remain weak, a reflection of touch comparisons and
underwhelming management guidance – the first quarter of 2012 remains the high
point of total quarterly earnings since the current earnings cycle got
underway in 2009. These tough comparisons are particularly pronounced in the
Finance sector, which is expected to experience an earnings decline after many
quarters of double-digit growth. The outlook for Tech is even weaker and
fairly widespread, which comes after the sector's underwhelming performance in
the previous quarter.
But lack of growth in the first quarter is not much of a concern for the
market, as investors are looking ahead to period of robust growth later in the
year, particularly in the back half of 2013 and all of 2014. The expectation
is that the +0.7% earnings growth in the first half of 2013 will be followed
by double-digit earnings growth in the second half of the year and into next
year. Driving these optimistic growth expectations are strong revenue gains
and further expansion in margins which are already in record territory.
Revenue growth is a function of economic growth. And while GDP growth has been
fairly erratic in recent quarters, the expectation is for a sustained period
of growth starting in the second half of the year. Hard to tell how reasonable
the revenue growth expectations are since they are so closely tied to the
uncertain economic backdrop.
But margins are a different story. Expecting margins to continue expanding
after they have crossed the prior cyclical peak does not seem reasonable or
oThe first-quarter 2013 reporting season has gotten underway. The 22
companies that have reported results present a mixed picture, with a few
high-profile negative surprises.
oTotal Q1 earnings are expected to be down -2.6% from the same period last
year, which reflects -0.9% drop in revenues and a modest contraction in
oTough comparisons and weak management guidance account for the weak
earnings growth picture. Total earnings reached their highest quarterly
total in the first quarter of 2012 and have yet to get back to that level.
oUnlike the last many quarters, Finance will be a drag on growth this
quarter. Tough comparisons for Bank of America (NYSE:BAC) and AIG
(NYSE:AIG) account for most of the earnings weakness.
oTech earnings were weak last quarter and they are expected to be even
weaker this time around. The sector's earnings weakness is broad-based and
not solely due to the negative comparisons for Apple (Nasdaq:AAPL) and
oThere hasn't been much earnings growth in recent quarters, but the
absolute level of quarterly earnings is expected to have bottomed in 2012
Q4 and start going up from 2013 Q2 onwards.
oTotal earnings in the first half of 2013 are expected to increase by
+0.7%, but ramp up to a +10.9% growth pace in the back half of the year
and a further +11.7% in 2014. A combination of revenue gains and margin
expansion reflect the positive outlook for the back half of the year.
oNet margins modestly contract in the first quarter, but start expanding
from the second quarter onwards. For the full year 2013, net margins are
expected to top the 2006 peak and expand even more in 2014.
oTotal earnings are expected to increase by +6.8% in 2013 and +11.7% in
2014. In dollar terms, earnings are expected to total $1.03 trillion in
2013 and $1.15 trillion in 2014, up from the 2012 total of $965 billion.
oThe bottom-up 'EPS' for the S&P 500 for 2013 and 2014 currently stands at
$109.75 and $122.60, respectively. The top-down 'EPS' estimates for 2013
and 2014 currently stand at $107.83 and $114.80. It seems that Wall Street
strategists are a bit less enthusiastic about the earnings picture than
Want stock picks from Zacks Equity Research that are based on earnings
estimates? Subscribe to the free "Profit from the Pros" newsletter:
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
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
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 http://at.zacks.com/?id=5187
Follow us on Twitter: http://twitter.com/ZacksResearch
Join us on Facebook: http://www.facebook.com/ZacksInvestmentResearch
Visit http://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
Contact: Sheraz Mian
SOURCE Zacks Investment Research, Inc.
Press spacebar to pause and continue. Press esc to stop.