Earnings Season Update – Still Not Good

Factset – Earnings Insight, February 10, 2012
Estimated Earnings Growth Rate for Q1 2012 Falls to 0% Today.
The blended earnings growth rate for the S&P 500 for Q4 2011 currently stands at 5.5%. If this is the final earnings growth rate for the quarter, it will mark the end of the streak of consecutive quarters of double-digit earnings growth at eight. However, the streak of consecutive quarters of overall earnings growth will extend to nine. Looking ahead to the current quarter, what is the projected earnings growth rate for Q1 2012? Are analysts expecting the streak of consecutive quarters of earnings growth for the S&P 500 to continue? Based on the current estimates, the answer is no. As of today, the estimated earnings growth rate for the S&P 500 dropped to 0.0%. The growth rate has steadily dropped from 8.0% on September 30 to 3.0% on December 30 to 0.0% today. Four sectors are predicted to see earnings growth in Q1 2012, while six sectors are predicted to see earnings decline. It is interesting to note that while earnings expectations for Q1 2012 have declined since the start of the quarter (to 0.0% from 3.0%), the price of the market has continued to rise. Since December 31, the price of the market has increased 7.5% (to 1351.95 from 1257.60).

Comment

The following slides show an update of our series of earnings charts. The story remains that this earnings season is not good. Stocks are simply rallying on the hope of a growing QE world and QE3 specifically. Printed money is a powerful force for risk assets. According to Bloomberg, 370 of the S&P 500 companies have reported earnings for the recently completed quarter. Only 63% beat expectations, one of the lowest “beat rates” of the last decade.
Revenues are doing even worse. As the next chart shows, of the 366 companies that have reported revenues through February 15, only 43% beat expectations. Overall, revenues estimates tend to be lower than earnings estimates as companies do not game revenues as much as earnings.

Click to enlarge:

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Source:
Bianco Research
Charts Of The Week
February 15, 2012

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