Zacks Earnings Preview: IBM, GE, Apple, DuPont and Ford
CHICAGO, April 22, 2013
CHICAGO, April 22, 2013 /PRNewswire/ -- Zacks.com releases the list of
companies likely to issue earnings surprises. This week's list includes IBM
(NYSE:IBM), GE (NYSE:GE), Apple (Nasdaq:AAPL), DuPont (NYSE:DD) and Ford
To see more earnings analysis, visit http://at.zacks.com/?id=3207.
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Into the Heart of Q1 Earnings Season
There is an air of disappointment in the market about the ongoing Q1 earnings
season. Some of it is justified. After all, what else should investors think
when companies like IBM (NYSE:IBM) and GE (NYSE:GE) come up short? Results
from the Technology sector have been underwhelming and the revenues overall
have been on the weak side.
That said, the reality is that Q1 results aren't materially weaker than what
we saw in the 2012 Q4 earnings season. The market seemed satisfied, if not
exactly thrilled, with Q4 results, as its strong momentum in January and
February this year shows.
What this means is that the excessive hand-wringing may not solely be due to
Q1 results, but rather what these results tell us about the coming quarters.
Consensus expectations for the first half of 2013 appear quite reasonable,
with total earnings for companies in the S&P 500 expected to increase by only
+1.2% from the same period in 2012. But estimates for the back half of the
year represent a significant growth ramp up -- +10.8% over the 2012 period.
Consensus estimates then extrapolate the expected second-half 2013 growth
recovery into 2014, resulting in further gains of +11.7%. Recent economic data
from home and abroad is likely prompting a reassessment of these earnings
growth expectations. The earnings miss from IBM and GE's reference to Europe
bring home this issue.
We are hardly being premature in drawing these conclusions from the Q1 results
we have seen thus far. After all, the 104 S&P 500 companies that have reported
results already (as of Friday, April 19th) represent 1/3rd of the total market
capitalization of the index. We will get a deluge of earnings reports this
week, with a total of 665 companies coming out with Q1 results, including 162
S&P 500 members. This includes a host of industry leaders from Apple
(Nasdaq:AAPL) to DuPont (NYSE:DD) to Ford (NYSE:F).
The Q1 Earnings Scorecard
The Scorecard for the 104 companies that have reported results show total
earnings growth of +4.6%, with 69.2% of the companies beating earnings
expectations with a median surprise of +3.2%. Revenues are up +3.4%, with only
35.6% of the companies coming ahead of top-line expectations, with a median
surprise of (negative) -0.3%.
The earnings growth rate and earnings 'beat ratio' (% of companies coming out
with positive surprises) for these 104 is better than what these same
companies reported in 2012 Q4. But the revenue growth rate and 'beat ratio' is
lower, with the beat ratio particularly weak in the current period.
Technology results have been on the weak side thus far. We will find out more
this week as Apple and Amazon report results, but the Tech companies that have
reported already account for 46% of the sector's total market capitalization.
Only 64.3% of the Tech companies have beaten Q1 earnings expectations thus
far, weaker than the earnings 'beat ratio' for the S&P 500 as a whole of 69.2%
and the 78.6% 'beat ratio' for the same group of companies in Q4.
The revenue side is even weaker, with only 35.7% of Tech companies coming
ahead of top-line expectations, roughly in-line with the S&P 500 as whole, but
materially weaker than the group's revenue 'beat ratio' in Q4.
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