Zacks Earnings Trends Highlights: Apple, Intel, Bank of America and AIG

   Zacks Earnings Trends Highlights: Apple, Intel, Bank of America and AIG

PR Newswire

CHICAGO, April 24, 2013

CHICAGO, April 24, 2013 /PRNewswire/ --Zacks Director of Research, Sheraz
Mian, says, "We have no hesitation in stating that Q1 results are not that
different from what we have been seeing in the last few quarters."

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

Q1 Earnings Season: Another Average Reporting Period

We are in the thick of the 2013 Q1 earnings season, with results from 148 S&P
500 companies already out. A lot of earnings reports are still to come, but
these 148 companies account for 42.5% of the index's total market
capitalization and together account for 45.5% of the index's total Q1
earnings. As such, we have a fairly representative sample of reports in front
of us from which to pass judgment on the Q1 earnings season.

Investors seem to be having a hard time judging this earnings season,
alternating between bouts of optimism and hand-wringing. But from out vantage
point, the issue isn't that complicated. We have no hesitation in stating that
Q1 results are not that different from what we have been seeing in the last
few quarters.

There are no doubt pockets of weakness – most companies are missing revenue
expectations and positive surprises in the Tech sector are on the light side.
But the overall level of growth (or lack thereof), surprises, and guidance is
not materially weaker than what we saw from these companies in 2012 Q4 and the
quarter before.

As such, the earnings question swirling around in the market at present is not
so much about the Q1 earnings season, but rather what these results tell us
about the appropriateness of expectations for the coming periods, particularly
the second half of 2013 and next year.

Consensus expectations for the first half of 2013 aren't looking for much
earnings growth (up only +1.4% year over year), but estimates for the back
half of the year represent a significant ramp up (up +10.8%) in growth, which
then continues into 2014 (up +11.6%).

Recent economic data from home and abroad will likely prompt a reassessment of
these consensus expectations. But the big question is with respect to how the
market would react to this expected downward adjustment to earnings
expectations. It has essentially shrugged such revisions thus far, but we will
have to wait and see what happens in the coming days.

Key Points

  oTotal earnings for the 148 S&P members that have already reported
    first-quarter 2013 results are up +1.8%, with 67.6% of the companies
    beating earnings expectations. Total revenues are up +3.8%, with only
    32.4% of the companies coming ahead of revenue expectations.
  oOverall results are comparable to what these same 148 companies reported
    in 2012 Q4, though revenue surprises have overwhelmingly been on the
    negative side.
  oTech earnings were weak last quarter and they are 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 Intel
    (Nasdaq:INTC).
  oThe composite earnings growth rate for Q1, combining the 148 reports that
    have come out with the 352 still to come, is +0.1% on +0.3% higher
    revenues and essentially flat revenues.
  oTough comparisons 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 is a drag on growth this quarter,
    with tough comparisons at Bank of America (NYSE:BAC) and AIG (NYSE:AIG)
    accounting for most of the sector's earnings weakness.
  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.
  oNet margins are expected to be essentially flat in Q1, 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 +6.5% in 2013 and +11.6% 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
    $109.49 and $122.17, 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
    the analysts.

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Contact: Sheraz Mian
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