Apple, Facebook, McDonalds, GM and Dow Chemicals are part of Zacks Earnings
CHICAGO, July 22, 2013
CHICAGO, July 22, 2013 /PRNewswire/ --Zacks.com releases the list of
companies likely to issue earnings surprises. This week's list includes Apple
(Nasdaq:AAPL-Free Report), Facebook (Nasdaq:FB-Free Report), McDonalds
(NYSE:MCD-Free Report), GM (NYSE:GM-Free Report) and Dow Chemicals
To see more earnings analysis, visit http://at.zacks.com/?id=3207.
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Q2 Earnings: Nothing Good Outside Finance
We are getting into the heart of the 2013 Q2 earnings season this week, with
more than 600 companies including 150 S&P 500 members reporting results. But
having seen results from more than 20% of the S&P 500 members that combined
account for more than 30% of the index's total market capitalization, we
probably have a good-enough sense of how this earnings season is unfolding.
The results thus far indicate that total Q2 earnings for the S&P 500 index
will likely reach a new all-time record, surpassing the level reached in 2013
Q1. On conventional metrics of earnings season performance like aggregate
growth rates (earnings and revenue), beat ratios (earnings and revenues), and
guidance, the Q2 season thus far is tracking what we saw in Q1. You would
recall that the Q1 earnings season wasn't very good, but it wasn't that
Buying too much into this not-so-bad picture is misleading as strength in the
Finance sector is helping hide a lot of weakness in the aggregate earnings
data. I will lay out the numbers a little later, but the earnings picture
outside of Finance is a lot weaker than what the aggregate numbers for the S&P
The Scorecard for the broader S&P 500, as of Friday, July 19th, shows Q2
results from 104 S&P 500 companies or 20.8% of the index's total membership
that combined account for 32% of its total market capitalization. Total
earnings for these 104 companies are up +8.1%, with 61.5% beating earnings
On the revenue side, we have a growth rate of +4.5%, with 44.2% coming ahead
of top-line expectations. The earnings and revenue growth rates and the
revenue beat ratio seen thus far are broadly in-line with what we saw from the
same group of 104 companies in Q1, while the earnings beat ratio is modestly
on the lower side.
Strong results from the Finance sector are playing a big role in keeping the
aggregate Q2 data for the S&P 500 thus far in the "not-so-bad" category. It is
very hard to be satisfied with the aggregate numbers once Finance is excluded.
Total earnings for the Finance sector are up +34.1% on +10.7% higher revenues,
with beat ratios of 76% for earnings and 68% for revenues.
Strip out Finance from the reports that have come out already and total
earnings growth turn negative – down 2.9%. This is weaker than what these same
companies reported in Q1. There are few positive surprises outside of Finance
as well, with the earnings and revenue beat ratios outside of Finance tracking
below Q1's levels.
The composite Q2 growth rate, where we combine the results for the 102 that
have come out with the 398 still to come, is for +1.2% total earnings growth
on +0.1% higher revenues. Excluding Finance, the composite earnings growth
rate drops to a decline of 4.1%. Bottom line, the earnings picture outside of
Finance is very weak.
The aggregate numbers would shift as results from almost 80% of S&P 500
members are still awaited. This week takes us beyond the half-way mark in the
reporting cycle, with a total 622 companies reporting results, including 155
S&P 500 members.
In addition to Apple (Nasdaq:AAPL-Free Report) and Facebook (Nasdaq:FB-Free
Report), we will get results from McDonalds (NYSE:MCD-Free Report), GM
(NYSE:GM-Free Report), Dow Chemicals (NYSE:DOW-Free Report) and many other
industry leaders. We have a decent enough sense of how the Q2 earnings season
is unfolding at this stage. But by the end of this week, we will have reached
a high degree of confidence in our conclusions.
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Since 1988, the Zacks Rank has proven that "Earnings estimate revisions are
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1988, Zacks Rank #5 stocks have significantly underperformed the S&P 500 (+3%
versus +10%). Thus, the Zacks Rank system allows investors to truly manage
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