Zacks Earnings Trends Highlights: Intel and Bank of America
CHICAGO, Oct. 16, 2014 /PRNewswire/ -- Zacks Director of Research Sheraz Mian says, "On most conventional comparative metrics, the Q3 earnings season is tracking closely what we had seen in the preceding reporting cycle."
Q3 Earnings Scorecard as of October 15, 2014
Intel's (Nasdaq:INTC-Free Report) positive-looking report after the close on Tuesday hasn't helped the stock in today's session. But one could argue that the stock would be down much more in today's 'panicky' session had its numbers been bad. Intel may not have reported blow-out numbers, but they aren't bad either to deserve this kind of beating today. With Bank of America (NYSE:BAC-Free Report), which also reported good enough numbers this morning, one could at least say that the sharp slide in benchmark treasury yields today more than offsets any good from their earnings report. Hard to make any such argument in Intel's case. But then again, there is no shortage of examples where investors throw away the baby with the bathwater.
It is perhaps obvious to some, but it's still worth repeating that earnings reports aren't driving today's market mayhem. The often-cited global growth worries are for real and will eventually have a bearing on corporate earnings as well. But they aren't getting corroborated from the admittedly small number of Q3 earnings reports that we have seen thus far. In fact, on most conventional comparative metrics, the Q3 earnings season is tracking closely what we had seen in the preceding reporting cycle.
The Scorecard
As of this morning's reports, we have now Q3 results from 44 S&P 500 members that combined account for 14.5% of the index's total market capitalization. Total earnings for these 44 companies are essentially flat from the period last year (up only +0.1%), with 61.4% of the companies beating earnings estimates with a median surprise of +2.6%. Total revenues for these companies are up a much stronger +4.4%, with a very good 63.6% beating top-line estimates with a median revenue surprise of +1.1%.
The Finance sector is the biggest earnings contributor to the S&P 500 index any way and it has an even greater weightage in the results thus far. The flat earnings growth picture for the index is solely due to the Finance sector. Excluding Finance, the aggregate earnings growth rate improves materially (+13.2% vs. +0.1%). All of the Finance sector drag is because of Bank of America, which had a tough comparison this quarter due to the huge litigation charge.
Keep in mind two things as analyze the comparison charts above. First, 2014 Q2 was a strong reporting cycle, likely reflecting a bounce back from the extremely low levels to which profits had fallen in the weather beaten Q1. Second, the results thus far have been held back by weak results from Bank of America.
Looking at Q3 expectations as a whole, combining the actual results from the 44 S&P 500 members that have reported with estimates for the remaining 456, total earnings are expected to be up +2.6% on +2.2% higher revenues. The composite growth has started going up as more companies report and beat estimates.
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