Earnings Season Starts Today

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CNBC – Earnings Are the Next Big Test for Stocks
In the coming week, the second quarter earnings season kicks off with just a few reports, but they will be important early looks at whether the fallout from Europe and the slower global growth is hurting corporate America. Alcoa is first out on Monday, followed by an interim report from Chevron Wednesday. Results Friday are expected from JPMorgan, which was hit by a controversial derivatives trading loss, totaling billions. After Friday’s disappointing U.S. June payrolls, jobs-related data, such as Thursday’s weekly jobless claims, will be monitored, as will the minutes of the last Federal Reserve meeting Wednesday. But more important, perhaps, is a batch of fresh Chinese data, starting off Monday with inflation and export data, and winding down Friday with GDP, retail sales, and industrial output.

Factset – Earnings Insight, July 6, 2012
Information Technology Sector: Apple
The Information Technology has the fourth highest earnings growth rate (3.3%) and the second highest sales growth rate (6.3%) of all ten sectors. However, almost all of this growth is due to Apple. Excluding Apple, the earnings growth rate for the Information Technology sector falls to -2.4% and the sales growth rate falls to 3.2%. Apple is part of the Computers & Peripherals industry, which has the highest earnings growth rate (17.9%) of any industry in the sector. The Internet & Software Services (13.0%) and Communications Equipment (10.5%) industries are also predicted to see double-digit earnings growth for the quarter. The Semiconductor & Semiconductor Equipment industry is expected to see the lowest earnings growth (-21.3%) of all eight industries in the sector.
Excluding Bank of America, Earnings Growth Falls to -1.7%
Not only is Bank of America the largest contributor to earnings growth for the Financials sector, it is also the largest contributor to earnings growth for the entire S&P 500. Excluding Bank of America, the earnings growth rate for the index would fall to -1.7% from 3.0%. Bank of America is predicted to report EPS of $0.16 compared to the year-ago actual EPS of -$0.90.


Our charts use Bloomberg’s operating earnings estimates.  They differ from the Factset estimates.  However, as noted immediately above, if Factset excludes Bank of America (BAC) , the other 499 companies are expected to show an earnings growth rate of -1.7%, or nearly the same as Bloomberg’s estimate.  Bloomberg defines BAC’s operating earnings differently from Factset, which accounts for all the difference in their estimates.  Since there is no standard definition for operating earnings, we cannot say which is the better measure.  However, the larger point is no earnings growth is expected for the S&P 500 once BAC is removed from the equation.
What about the whole of 2012?  Earnings expectations for the year are shown below.  While positive growth is still expected, recent updates are going in the wrong direction in a hurry.

Bianco Research

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