U.S. companies from Pfizer Inc. (PFE) to 3M Co. (MMM) are beating analysts’ quarterly sales estimates at the highest rate in 1 1/2 years, undeterred by political gridlock in Washington and slowing demand in China.
Of 175 companies in the Standard & Poor’s 500 Index that have reported fourth-quarter results so far, 67 percent have exceeded analysts’ average revenue projections. That’s the highest percentage since the second quarter of 2011, according to data compiled by Bloomberg. Fewer than half the companies had surprise sales gains in the second and third quarters.
Pfizer, the world’s largest drugmaker, today reported revenue of $15.1 billion, beating the estimate of $14.4 billion in its biggest positive surprise in five quarters. 3M, which reaches both companies and consumers with products from sandpaper to Post-it sticky notes, last week exceeded projections on its best sales gain in a year.
“We are seeing a pickup in global growth and business activity, so companies are beating” estimates, Nick Raich, research director at KeyCorp’s private banking unit in Cleveland, said yesterday. The unit manages about $25 billion.
Ford Motor Co. (F) topped fourth-quarter sales estimates today with a 5.8 percent increase on higher F-Series pickup demand. Ford’s automotive revenue rose to $34.5 billion, ahead of the $33 billion average prediction on higher F-Series pickup demand.
Yahoo! Inc. (YHOO), the largest U.S. Web portal, yesterday posted a 4.5 percent sales increase for its biggest jump in more than four years. The Sunnyvale, California-based company in 2012 recorded its first revenue gain in four years after collecting higher prices for ads placed on the company’s pages and increasing revenue from search-related marketing messages.
Yahoo’s profit also beat estimates, putting it among the 76 percent of S&P 500 companies reporting so far that exceeded earnings projections. The third-quarter rate was 71 percent.
While sales gains for S&P 500 (SPX) companies may more than quadruple to 4.6 percent by this year’s third quarter, based on estimates compiled by Bloomberg, the results may be uneven. Ford, for example, today said its 2013 loss in Europe may be bigger than its previous projection because a possible recession would sap demand for cars. And yesterday, Yahoo’s sales forecasts for the current quarter and 2013 fell short of analysts’ predictions.
Even so, stock markets worldwide are reflecting companies’ improving performances.
The S&P 500 rose 5.2 percent this year through yesterday, aided by low interest and mortgage rates that have spurred borrowing and demand for housing. The Stoxx Europe 600 Index (SXXP) rose about 3.5 percent in the same period while the FTSE MIB Index (FTSEMIB), consisting of 40 stocks listed on the Borsa Italiana, climbed 10 percent.
“The economic fundamentals are increasingly warming for sustained economic growth and higher equity prices,” Ed Hyman, chairman of New York-based International Strategy & Investment Group, wrote today in a note to clients. “Despite tax hikes and budget-negotiations overhang, weekly, monthly and first-quarter preliminary economic data seems robust.”
St. Paul, Minnesota-based 3M boosted sales by 4.2 percent with higher demand in the U.S., Latin America and China. Sales from existing businesses climbed 16 percent in China, even as economic growth slowed in Asia last year.
“For the base business we see a recovery coming and we feel optimistic about that,” 3M Chief Executive Officer Inge Thulin told analysts last week. “We’re still cautious.”
Reflecting that caution, some of the companies are matching or beating previously lowered forecasts. Peoria, Illinois-based Caterpillar Inc. (CAT), the largest maker of construction and mining equipment, yesterday reported revenue sank 6.8 percent, matching the average estimate, as machinery dealers cut orders.
“The second half of 2012 really sputtered,” Caterpillar CEO Doug Oberhelman said in a Jan. 28 interview on Bloomberg Television. “We had the fiscal cliff, the steady din of that, we had the uncertainty of an election.”
Even so, Oberhelman said he is “pretty optimistic about ’13 around the world.”
The worldwide economy may grow at least 2.5 percent this year, up from about 2.3 percent in 2012, Caterpillar projected. The company sees U.S. economic growth of at least 2.5 percent, helped by housing, and 8.5 percent expansion in China as its government boosts credit growth and infrastructure spending.
In the U.S., economic growth shows signs of withstanding political debates about federal deficits and spending. Orders for durable goods rose in December for an unprecedented fourth straight month, indicating manufacturing will improve in 2013, a Commerce Department report showed Jan. 28.
“We see just basically broad-based gain,” John Herrmann, president of Herrmann Forecasting LLC in Summit, New Jersey, said in an interview yesterday on Bloomberg Radio’s “Bloomberg Surveillance.” “This is just a solid report. We are seeing more risk taking by businesses and by investors.”
Businesses don’t yet know whether lawmakers will avert across-the-board government spending cuts scheduled to begin March 1, even after the fiscal pact passed by Congress on Jan. 1 avoided sweeping tax increases that had threatened to crimp consumer spending.
“Our visibility to forecast the coming couple of months is extremely limited,” Erik Gershwind, CEO of MSC Industrial Direct Co., told analysts earlier this month. Fiscal first- quarter revenue for the Melville, New York-based company missed analysts’ estimates, as did its profit forecast for the second quarter, after customers restrained orders, he said.
For now, Caterpillar’s CEO said 2013 is shaping up for improved performance worldwide.
“China certainly is stronger today,” Oberhelman told Bloomberg Television. “Latin America looks pretty good. Boy, the drumbeat out of Europe is sure behind us. All the bad news is out, at least for a while.”
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