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Earnings Scorecard as of July 22, 2012

07/23/2012

As of Sunday, July 22, 2012, roughly 24% or 118 of the 500 SPX corporations have reported their quarterly earnings for the calendar second quarter.  

 

Since Alcoa (AA) kicked off the season on Monday, July 9, 2012, the SPX has risen from 1352.46 to a close on Friday, July 20, 2012 of 1362.66 (Figure 1.1). The modest eight-tenths of a percent gain is despite earnings that are weak on the top line, facing currency headwinds, experiencing margin compression, and offering soft guidance. However, I expect when investors reflect back on the overall tepid earnings period, the resilient earnings reports of index heavyweights such as IBM, JPM, MSFT, GOOG, INTC, and UNP will be what matters most.

 

The week ahead for July 23, 2012 is an extremely critical earnings week as 172 more SPX companies report. In a separate blog, you will find the upcoming week’s earnings schedule and those companies whose reports I expect will impact the market.

 

Reported earnings to date:

 

  • 73% of companies have exceeded profit forecasts, in line with the prior year’s average.

 

  • Sales growth for the 118 reported companies is 2.94%.

 

  • Earnings growth for the 118 reported companies is 0.09%.

 

  • 7 out of 30 possible materials companies have reported; to date it is the weakest sector with sales growth contraction of (3.92%) and earnings growth contraction of (23.09%).  

 

  • 21 out of 71 possible technology companies have reported, with sales growth of 3.38% and earnings growth of 1.21%.

 

  • Estimates for Q2 profits prior to July 9, 2012 were for a contraction of (2.1%); currently the outlook has improved to a contraction of (1.6%)

 

o   Updated analysts’ expected earnings growth by sector

 

1.      Consumer Discretionary   Q2 (-4.2%)              Q3 +7.1%               Q4 +18.5%

2.      Consumer Staples             Q2 +0.9%                Q3 +3.1%               Q4 + 7.1%

3.      Energy                               Q2 (-19.3%)            Q3 (-25.1%)           Q4 (-2.1%)

4.      Financials                          Q2 +2.2%                Q3 +20.6%             Q4 +31.3%

5.      Health Care                       Q2 (-2.0%)              Q3 (-1.8%)             Q4 + 4.2%

6.      Industrials                         Q2 +7.8%                Q3 +6.8%               Q4 + 8.7%

7.      Technology                        Q2 +8.0%                Q3 +9.7%               Q4 +14.2%

8.      Materials                          Q2 (-13.3%)            Q3 (-9.6%)             Q4 +28.6%

9.      Telecom                            Q2 (-0.7%)              Q3 (-6.0%)             Q4 +25.7%

10.  Utilities                              Q2 (-6.3%)              Q3 (-5.4%)             Q4 + 6.2%

 

 

 

Figure 1.1 S&P 500® Index (SPX), July 9, 2012 to July 22, 2012

 

Source: Bloomberg

Virtus Investment Partners provides this communication as a matter of general information. The opinions stated herein are those of the author and not necessarily the opinions of Virtus, its affiliates or its subadvisers. Portfolio managers at Virtus make investment decisions in accordance with specific client guidelines and restrictions. As a result, client accounts may differ in strategy and composition from the information presented herein. Any facts and statistics quoted are from sources believed to be reliable, but they may be incomplete or condensed and we do not guarantee their accuracy. This communication is not an offer or solicitation to purchase or sell any security, and it is not a research report. Individuals should consult with a qualified financial professional before making any investment decisions.