4Q 2013 Earnings On Track; No Reason For Doom And Gloom

4Q 2013 Earnings On Track; No Reason For Doom And Gloom

A Goldman Sachs Portfolio Strategy Research report published last Friday highlighted the fact that fourth quarter 2013 S&P 500 (INDEXSP:.INX) earnings are steadily improving after a rocky start. GS analysts Amanda Snelder et al. argue that earnings beats last quarter are above historical averages and that companies continue to report strong overall top-line results.

By the same token, the Goldman Sachs team suggests the current market downswing is not a major worry as earnings are still on track for 7% growth in 2014 according to their internal projections.

4Q earnings on track

The GS report points out that although the 4Q 2013 earnings season got off to a slow start, overall earnings results have improved significantly now that we have seen results from over 80% of the S&P 500 (INDEXSP:.INX). “The percentage of earnings beats rose to 47% from 39% last week. Firms beat estimates by 3.7% excluding the impact of accounting adjustments. Using a mix of realized and consensus earnings, S&P 500 4Q EPS is now expected to be $29.07. 2013 operating EPS is currently $108 (12% growth).”

Why The Term ‘Value Investing’ Is Redundant

Warren BuffettWhat does value investing really mean? Q1 2021 hedge fund letters, conferences and more Some investors might argue value investing means buying stocks trading at a discount to net asset value or book value. This is the sort of value investing Benjamin Graham pioneered in the early 1920s and 1930s. Other investors might argue value Read More

The analysts also highlight relatively strong overall top line results for S&P 500 (INDEXSP:.INX) components. “40% of firms beat consensus sales expectations by more than one standard deviation (vs. ten-year average of 35%). 12% of firms have disappointed on sales by that magnitude (vs. 20%).”

Continuing increase in negative guidance

It seems negative guidance has actually become the norm rather than the exception. Among the 81 companies who provided full-year 2014 guidance following their 4Q earnings announcements, 77% of the firms guided below consensus analyst expectations. That is a solid 12% more than the historical average of 65%. Snelder et al. also mention that median company guidance came out around 1% less than analyst consensus.

Health care and IT sectors strong

The GS report also highlighted the relative revenue strength in the health care and IT sectors in 4Q 2013. “76% of reported Health Care companies and 56% of reported Info Tech firms exceeded consensus sales estimates. Info Tech and Health Care represent about 30% of reported companies, but half of revenue beats. Despite revenue beats, Information Technology sales fell 1% relative to the 4Q 2012 sales level.”
The S&P 500 (INDEXSP:.INX) is down over 39 points at 1744.24 as of 3:15 PM ET today.

No posts to display