CHICAGO, Jan. 24, 2014 /PRNewswire/ -- Zacks Director of Research Sheraz Mian says, "There is actually nothing wrong with earnings picture; they are about as good or as bad any of the other recent quarters."
What's Wrong with the Earnings Picture?
With respect to the Scorecard for 2013 Q4, we have seen results from 102 S&P 500 members accounting for 27.3% of the index's total market capitalization. Total earnings for these 102 companies are up +22.8% from the same period last year, with 65.7% beating earnings expectations with a median surprise of +2.0%. Total revenues for these companies are up +3.6%, with 54.9% beating revenue expectations with a median surprise of +0.8%.
The +22.8% 'headline' total earnings growth rate definitely looks fairly robust, particularly when compared to the growth rate for this same group of 102 companies in the last few quarters. Before we get too excited about this growth pace and start extrapolating it into the coming quarters, we should keep in mind that the bulk of this growth is due to easy comparisons for just three companies – Bank of America (NYSE : BAC-Free Report), Verizon (NYSE : VZ-Free Report) and Travelers (NYSE : TRV-Free Report) Exclude these three and total earnings growth for the S&P 500 companies that have reported drops to +8.3% from +22.8%, which is about where growth has been in recent quarters.
The composite picture for Q4 – combining the results for the 102 companies that have reported already with the 398 still to come – is for earnings growth of +7.6% on +1.7% higher revenues and 52 basis points higher margins. The actual Q4 growth rally will most likely be higher than this, a function of management's well refined expectations management skills.
More important than what happened in Q4 is the question of whether management guidance for the coming period(s) will get any better from what we have become accustomed to in recent quarters. My sense is that the preponderance of guidance will remain negative, as has been the case for more than a year now. This will keep downward pressure on estimates for the coming quarters.
Trends on the estimate revision front have been negative for a while, but we could afford to overlook such details in the Fed-inspired rally. It will be interesting to see if investors will continue shrug estimate cuts in the post-Taper world.
Want stock picks from Zacks Equity Research that are based on earnings estimates? Subscribe to the free "Profit from the Pros" newsletter: Click here
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term. Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
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.
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.
Follow us on Twitter: http://twitter.com/zacksresearch
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.
Zacks Investment Research
800-767-3771 ext. 9339
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.
SOURCE Zacks Investment Research, Inc.