Expedia Surge Caps Week of Mixed S&P 500 Earnings Reports
Expedia Inc. (EXPE)’s higher-than-estimated earnings yesterday capped a week of mixed results that left the ratio of Standard & Poor’s 500 Index profits beating analysts’ predictions this reporting season at 76 percent.
The pace fell from 79 percent a week earlier after results from General Motors Co. (GM), Merck & Co., Aetna Inc. (AET) and Cigna (CI) Corp. came up short. With more than two-thirds having posted results for last quarter, the rate remains higher than the third-quarter ratio of 75 percent, data compiled by Bloomberg show.
This week analysts cut estimates for 2014 S&P 500 earnings growth to 8 percent from 8.5 percent on Jan. 31 as economic data pointed to mixed signals in the U.S. labor market and a cooling in manufacturing in January. The estimated profit growth this year, even trimmed, will still accelerate from 5.4 percent in 2013, the data show, as consumer demand strengthens and households reduce debt burdens.
“We are seeing a relatively healthy economy,” said Jan Siegmund, chief financial officer at Automatic Data Processing Inc., the payroll-processing company that releases national employment numbers for the private sector. ADP, based in Roseland, New Jersey, benefited from strong demand from small and mid-market businesses, Siegmund said in a Feb. 6 interview.
ADP Research Institute’s figures on Feb. 5 showed companies added 175,000 workers in January after a revised 227,000 rise in December. The number trailed the median projection of 185,000. Yesterday Labor Department data also showed a smaller-than-anticipated increase in payrolls, while the jobless rate unexpectedly dropped to 6.6 percent.
Expedia, the Bellevue, Washington-based online travel agency, reported a surge in bookings for the fourth quarter, sending its stock up as much as 16 percent. Moody’s Corp. (MCO)’s stock also soared -- to a record -- after the credit-rating company posted earnings that topped estimates yesterday.
Among the biggest declines was LinkedIn Corp. (LNKD), which forecast smaller growth for first-quarter sales than analysts anticipated. And health insurer Cigna joined Aetna in missing profit predictions for last quarter amid rising medical costs.
So far in the reporting season, S&P 500 earnings had an aggregate earnings surprise gain of 5 percent, which led to a one-day stock increase of 0.4 percent. The materials sector had the biggest surprise gain at 16 percent, followed by financials at 10 percent, data compiled by Bloomberg show. Utilities had the lowest -- zero on an aggregated basis.
S&P 500 earnings growth probably accelerated for the third straight period to 8.3 percent last quarter, according to analysts’ estimates. Loews Corp. (L) is scheduled to report Feb. 10, followed by CVS Caremark Corp. (CVS) on Feb. 11; CBS Corp. (CBS) and Cisco Systems Inc. (CSCO) and Whole Foods Market Inc. (WFM) on Feb. 12; and Kraft Foods Group Inc. (KRFT) on Feb. 13.
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