Zacks Earnings Trends Highlights: Starbucks, Dow Chemical, Caterpillar, Whole Foods and Kellogg

Zacks Earnings Trends Highlights: Starbucks, Dow Chemical, Caterpillar, Whole
                              Foods and Kellogg

PR Newswire

CHICAGO, Nov. 8, 2013

CHICAGO, Nov. 8, 2013 /PRNewswire/ -- Director of Research Sheraz Mian says,
"Q3 earnings season had a shaky start... but all of that changed over the last
two weeks."


Q3 Earnings: The Best of 2013 Thus Far

The Q3 earnings season started weak, but has turned out to be the best of
2013. But before we get too carried away with that positive take, let's not
forget that the 'best of 2013' may not be much to crow about, particularly in
terms of growth. There is simply not much growth and most companies are still
guiding lower, prompting estimates for Q4 to come down.

That said, the picture emerging from the Q3 earnings season compares favorably
to recent quarters in terms of growth, beat ratios, and the absolute level of
total earnings, which are on track to reach a new all-time record in Q3.

Total earnings for the 440 S&P 500 companies that have reported results
already, as of Thursday morning November 7th, are up +4.6% from the same
period last year, with 65.7% beating earnings expectations with a median
surprise of +2.6%. Total revenues for these companies are up +2.9%, with 51.4%
beating revenue expectations with a median surprise of +0.1%.

The earnings beat ratio looks more normal now than was the case earlier in
this reporting cycle. It didn't make much sense for companies to be struggling
to beat earnings expectations following the significant estimate cuts in the
run up to the reporting season.

The composite earnings growth rate for Q3, combining the results from the 440
that have come out with the 60 still to come, currently remains at +4.6% on
+2.9% higher revenues. This will be the best earnings growth rate of 2013 thus
far, though expectations are for even stronger growth in Q4.

Guidance has been overwhelmingly negative over the last few quarters and is
not much different in Q3 either, a few notable exceptions aside. We saw
underwhelming guidance earlier in the cycle from such bellwethers as Starbucks
(Nasdaq:SBUX-Free Report), Dow Chemicals (NYSE:DOW-Free Report), and
Caterpillar (NYSE:CAT-Free Report), and more recently from Whole Foods
(Nasdaq:WFM-Free Report), Kellogg (NYSE:K-Free Report), and others.

Given this backdrop, estimates for Q4 will most likely come down quite a bit
in the coming weeks. And with the market expecting the Fed to wait till early
next year to start Tapering its QE program, investors may shrug this coming
period of negative estimate revisions, just like they have been doing for more
than a year now.

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