Zacks Earnings Trends Highlights: Microsoft (MSFT), Intel (INTC), Apple
(AAPL), Google (GOOG) and Pfizer (PFE).
CHICAGO, July 26, 2013
CHICAGO, July 26, 2013 /PRNewswire/ -- Zacks Director of Research Sheraz Mian
says," [T]he strength in Finance sector results is helping hide broad earnings
The following is an excerpt from this week's Earnings Trends. Click here to
access the PDF.
Weak Earnings Growth Outside Finance
The Finance sector gave the 2013 Q2 earnings season a flying start, but the
sector's momentum came as no surprise as estimate revisions activity in the
run up to the reporting season indicated a strong showing from the sector. The
sector's actual performance has turned out to be even better relative to
pre-season expectations. The fact is that the strength in Finance sector
results is helping hide broad earnings weakness elsewhere.
Total earnings for the 240 S&P 500 companies that have reported Q2 results, as
of Thursday July 25^th, are up +4.1% from the same period last year, with
65.8% beating earnings expectations with a median surprise of +2.6%. Total
revenues for these companies are up +3.8%, with 45.4% beating revenue
expectations with a median surprise of +0.4%.
Not to make light of Finance's strength, but a big part of the bank earnings
growth is due to loan loss reserve releases and not from loan growth. Reserve
releases are a net positive as they reflect improving credit quality, but they
don't constitute the sector's core earnings power. That said, the earnings
growth picture outside of Finance is very weak.
My sense is that estimates need to come down in a big way. The market hasn't
cared much in the recent past about negative revisions as aggregate earnings
estimates have been coming down for over a year now. But if we are entering a
post-QE world, as I believe we are, then it will likely be difficult to
overlook negative earnings estimate revisions going forward. How the market
responds to negative guidance and the resulting negative revisions will tell
us a lot about what to expect going forward.
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