High Percentage of Negative Guidance to Date, but Average Stock Prices Are Up

September 03, 2012 /

For Q3 2012, 80 S&P 500 companies have issued negative EPS guidance while 21 companies have issued positive EPS guidance.

If 80 is the final number of companies issuing negative EPS guidance for the quarter, it will mark the second highest number for a quarter during the past three years, only trailing the number recorded in Q4 2011 (84). If 21 is the final number of companies issuing positive guidance for the quarter, it will mark the lowest number of companies for a quarter since FactSet began tracking guidance in Q1 2006.

At the sector level (with a minimum of five companies issuing quarterly EPS guidance), the Health Care (100%) and Materials (100%) sectors have the highest percentages of companies that have issued negative EPS preannouncements, while the Industrials (50%) and Consumer Staples (50%) sectors have the highest percentage of companies that have issued positive EPS preannouncements.

The overall percentage of companies issuing negative guidance for Q3 2012 stands at 79% (80 out of 101). If this is the final percentage for the quarter, it will be the highest percentage recorded since FactSet began tracking guidance data in Q1 2006.

The Q4 2011 quarter currently has the record for the quarter that finished with the highest percentage of companies issuing negative EPS guidance (73%).

Although the percentage of negative preannouncements is running at an all-time high, the market is not punishing the price performance of these stocks in the short term. For the 80 companies that have issued negative EPS guidance for Q3 2012 to date, the average price change (2 days before the guidance was issued through 2 days after the guidance was issued) has been +0.2%.

This percentage is well above the average over the past five years of -1.8%. Just under half of the companies (38) that have issued negative guidance have recorded an increase in price during this time frame. Ten of these companies witnessed a double-digit increase in price.

For companies that have issued positive guidance, the story has been even better. Of the 21 companies that have issued positive EPS guidance for Q3 2012, the average price increase has been +6.5%. This percentage is also well above the average over the past five years of +2.6%.

On average, companies issued EPS guidance that was 10.3% below the mean EPS estimate. This difference is below the trailing 5-year average (-7.8%).

 

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