Zacks Earnings Trends Highlights: Bank of America, Gilead, Apple and Facebook

News provided by

May 09, 2014, 09:30 ET

CHICAGO, May 9, 2014 /PRNewswire/ -- Zacks Director of Research Sheraz Mian says, "The primary reason for the sub-par aggregate growth rate is the drag from the Finance sector."

The EPS beat ratio is tracking better relative to recent quarterly averages, likely reflecting the low levels to which estimates had fallen ahead of the start of the Q1 earnings season. But the revenue beat ratio is on the weak side relative what we have been seeing in recent quarters.

We should keep in mind, however, that the primary reason for the sub-par aggregate growth rate is the drag from the Finance sector. The Finance sector results didn't have much growth this quarter after many quarters of strong momentum, but the sector's results were notably dragged down by weak results fromBank of America (NYSE:BAC-Free Report). Excluding Bank of America from the Finance sector, total earnings for the sector would be only -2.66% (vs. down -7.0% otherwise). And excluding Bank of America from the S&P 500 as whole would push up the aggregate growth rate to +2.6%.

Excluding the Finance sector as a whole, total earnings for the S&P 500 companies that have reported results would be up +4.0% on +3.3% higher revenues, which is actually better than what we have seen from the same group of ex-Finance companies in other recent quarters.

Key Points

The Q1 earnings season has ended for half of the 16 Zacks sector. Total earnings for the 446 S&P 500 companies that have reported results are up 1.6%, with 68.8% beating earnings expectations. Revenues for these companies are up 0.6%, with a revenue 'beat ratio' of 49.7%.
The performance from these companies, particularly the earnings growth and revenue beat ratio, is weaker than what we have seen from this same group of companies in recent quarters, with Finance as the major drag.
The Finance sector shifted gear this quarter, becoming a drag on aggregate growth after being a growth driver for many quarters. Bank of America is a big reason for the sector's weak growth this quarter, but the sector's total earnings growth would be weak relative to other recent quarters even after excluding Bank of America from the numbers. Finance sector stocks have underperformed the S&P 500 index in price action as well, with the average Finance sector stock up +2.5% year to date vs. +2.7% gain for the index as a whole.
Excluding the Finance sector, total earnings for the rest of S&P 500 companies that have reported Q1 results would be up +4.0% on +3.3% higher revenues and modestly higher margins. This is actually modestly better than the growth performance we have been seeing from this ex-Finance cohort in recent quarters as well. Gilead's (Nasdaq:GILD-Free Report) strong results and its impact on the Medical sector has materially helped this ex-Finance growth picture.
Apple (Nasdaq:AAPL-Free Report) and Facebook (Nasdaq:FB-Free Report) had strong Q1 results, though overall results for the Technology sector are not materially better than what we had seen in the preceding quarter. Total earnings for the 88.0% of the sector's total market capitalization that have reported results are up +4.9% on +4.2% higher revenues, with 73.1% of the companies beating EPS expectations and 59.6% beating revenue estimates.
The Utilities sector has been the best performer in the S&P 500 year to date in terms of stock price performance – up +13.3% vs. a gain of +2.7% for the index as whole. The sector has also been a strong performer on the earnings front in Q1, with total earnings for sector up +18.3% on +11.1% higher revenues and 72.7% of the companies beating EPS estimates and 75.8% coming ahead of revenue estimates.
The composite Q1 picture for the S&P 500, combining the actual results from the 446 companies with estimates for the 54 still to come, is for earnings to be up +1.2% from the same period last year, on +0.7% higher revenues on essentially flat margins. Sequentially, total earnings for the S&P 500 are expected to be down -3.6%, with the overall level of total earnings for the index the lowest in a year.
The consensus expectation is for the Q1 earnings season to be the low point of this year's earnings picture, both in terms of total earnings as well as the growth rate. Total quarterly earnings reached an all-time record in 2013 Q4, but are expected to fall short of that level in 2014 Q1. Expectations for the coming quarters reflect a strong ramp up, with each of the following three quarters a new all-time record.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Click here to subscribe to this free newsletter today.

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros.

Get the full Report on BAC - FREE

Get the full Report on GILD - FREE

Get the full Report on AAPL - FREE

Get the full Report on FB - FREE

Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
[email protected]
http://www.zacks.com

http://www.zacks.com/

Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Logo - http://photos.prnewswire.com/prnh/20101027/ZIRLOGO

SOURCE Zacks Investment Research, Inc.