Lowest Percentage of S&P 500 Companies Beating Sales Estimates Since Q1 2009

July 23, 2012 /

Of the 104 companies in the index that have reported earnings to date for Q2 2012, 74% have reported actual EPS above the mean EPS estimate. This percentage is consistent with the average over the past four quarters (72%). In terms of revenues, just 45% of companies have reported actual sales above estimated sales. This percentage is well below the average over the past four quarters (63%). In fact, this is the lowest percentage of companies reporting sales above estimates at this stage of the earnings season since Q1 2009 (31%).

The blended earnings growth rate for the S&P 500 for Q2 2012 is 2.7%, slightly above last week’s growth rate of 2.5%. The improvement in the growth rate is mainly due to upside earnings surprises form companies in the Financials sector (including Goldman Sachs, Bank of America, and Citigroup), partially offset by downside earnings surprises and downward revisions to estimates for companies in the Energy sector.

Bank of America is the largest contributor to earnings growth for the index at the company level, mainly due to an easy comparison to a large loss reported in the year-ago quarter. Excluding Bank of America, the projected earnings growth rate for the index falls to -2.1% from 2.7%.

Five of the ten sectors are reporting earnings growth for the quarter, led by the Financials (53.9%), Industrials (6.9%), and Information Technology (3.5%) sectors. The Energy (-22.0%) and Materials (-13.7%) sectors have the lowest earnings growth rates, as oil and commodity prices dropped during the quarter. Although nine of the ten sectors are reporting revenue growth for the quarter, the blended sales growth rate is below 1% (0.7%). Increased costs and slower global economic growth had a negative impact on both top-line and bottom-line growth for companies in the index.

Looking ahead, companies and analysts have reduced earnings estimates for the 2nd half of 2012 since the start of the third quarter. In terms of guidance for Q3 2012, 18 companies in the S&P 500 have issued negative EPS preannouncements to date while just four companies have issued positive EPS preannouncements. The estimated earnings growth rate for Q3 2012 stands at 0%. However, double-digit earnings growth (12.2%) is still projected for Q4 2012.

The upcoming week marks the second “peak” week of the Q2 2012 earnings season. During the week, 172 companies in the S&P 500 and ten companies in the Dow 30 are scheduled to report earnings.


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