Zacks Earnings Preview: Bank of America and Apple

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Jul 23, 2012, 09:30 ET

CHICAGO, July 23, 2012 /PRNewswire/ -- Zacks.com releases the list of companies likely to issue earnings surprises. This week's list includes Bank of America (NYSE:BAC) and Apple (Nasdaq:AAPL).

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Into the Thick of Q2 Earnings Season

We get into the thick of the second quarter earnings season this week, with reports from almost 850 companies coming out, including 163 from the S&P 500. By the end of the week, we will be past the halfway mark, with results from 56% of the companies released. We will get a much better sense of the second quarter reporting season after this week, but what we have seen thus far is not as bad as many of us feared just a few days back.

Based on the results from the roughly 25% of the companies in the S&P 500 that have already reported, we can safely say that the second quarter earnings season may not be materially different from what we saw in the last two quarters.

Total earnings for the companies that have already reported results are up 17% from the same period last year, primarily due to easy comparisons for the large banks in general and Bank of America (NYSE:BAC) in particular. This compares to 7.7% growth for these same companies in the first quarter, when banks didn't have such easy comparisons.

Approximately 67% of all companies are coming out with positive earnings surprises, with a median surprise of 2.5%. These same companies did a lot better in the first quarter, when 84% beat expectations and the median surprise was 4.6%. Excluding Finance, total earnings growth is a still respectable 4%, which compares to 6.4% in the first quarter.

The strong aggregate earnings growth rate will come down in the coming days as reports from other sectors pour in. We haven't seen that many reports yet from Utilities and Oil/Energy companies that are expected to negative year-over-year comparisons. Total earnings for the 75% of companies that have still to report results are expected to be down 4.3% from the same period last year, with earnings in the Oil/Energy and Utilities sectors down 21.6% and 15.3%, respectively.

Earnings for the remaining Tech companies are expected to be up 10.4%, while those that have reported already are up much more modest 2.1%. The reason for the variance is Apple (Nasdaq:AAPL), which reports after the close on Tuesday. Excluding Apple, total earnings for the Tech companies still to report will be down 0.7%.

The economic calendar is not that busy, with Friday's first read on the second quarter GDP as the most significant report. Other major reports include New Home sales for June (Wednesday), Durable Goods Orders for June (Thursday), Jobless Claims (Thursday) and the University of Michigan Consumer Sentiment survey for July on Friday.

Sheraz Mian is the Director of Research for Zacks.com.

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Contact: Sheraz Mian
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