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Updated SPX Earnings Scorecard

02/04/2013

Three weeks of Q4 2012 earnings have now been recorded. As of the close of business Friday, February 1, below is the reported EPS and revenue growth by sector as well as the percentage of positive or negative surprise.

The quality of last week’s earnings declined in both the actual reported figures and the 2013 guidance.  Before reporting season began, consensus Q4 EPS for the SPX was $25.51. Currently, Q4 EPS is tracking below $24, which would be the weakest quarter for 2012. Full year 2012 EPS for the SPX is tracking near $97, slightly higher than 2011’s $96. Consensus 2013 EPS for the SPX has moved slightly lower after recent corporate guidance to $112.

During the week of February 4, another 90 SPX companies will report: 13 on Monday, 27 on Tuesday, 24 on Wednesday, 23 on Thursday, and Friday will be the lightest day with only 3 companies reporting. The remainder of the reporting season will be dominated by utility, telecom, consumer staple, and consumer discretionary companies.

During the past week, the SPX (Figure 1.1) advanced .679% to close at 1513.17, its highest level since December 2007. Year to date, it is the Russell 2000® (RTY) Index (Figure 1.2) leading the major indices +7.282%. In fact, the RTY has already appreciated above its 2007 high. Year to date, the Dow Jones Industrial Average is +6.911%, the SPX is +6.099%, and the Nasdaq continues to lag at only +3.872%.

Sector performance has surprisingly recorded a lead position for energy +9.311 year to date and also leading the past week +1.535%. Technology continues to perform as the market laggard at +3.05% for the year; however, it did perform well last week at +1.468%, second only to energy. I will note there is a disconnect between energy equity returns and actual spot price returns for oil and natural gas futures. Outperformance in energy equity companies is being driven by expense management. Currently, investors should not fear an inflationary spike in spot future pricing.

The SPX has now gained +12.6% (Figure 1.3) since its 1343.35 intraday low on Friday, November 16, 2012. Investors should remain positioned long equities; there is little evidence to suggest otherwise. However at this time, tactical investors may begin to reduce long exposure to beta names and seek concurrent long exposure in more traditional mega cap names.

Week-to-Date Performance: 1. Energy +1.535%, 2. Tech +1.468%, 3. Utilities +1.242%, 4. Consumer Staples +1.115%, 5. Health Care +.933%, 6. Financials +.801%, 7. Industrials unchanged, 8. Materials (-.654%), 9. Consumer Discretionary (.943%)

Year-to-Date Performance:1. Energy +9.311% 2, Health Care +8.449%, 3. Financials +7.444%, 4. Industrials +6.781%, 5. Consumer Staples +6.504%, 6. Consumer Discretionary +6.284%, 7. Materials +5.221%, 8. Utilities +5.039%, 9. Technology +3.05%

S&P 500® Index (SPX) Sales Growth (254 companies reported)

Overall:  +0.09%, negative surprise of (-0.16%)

1.

Technology

+8.63%

positive surprise of +0.12%

47 out of 70 companies reported

2.

Cons Discret

+7.25%

positive surprise of +0.68%

28 out of 82 companies reported

3.

Financials

+6.32%

positive surprise of +1.04%

46 out of 81 companies reported

4.

Telecom

+2.99%

positive surprise of +1.00%

3 out of 8 companies reported

5.

Cons Staples

+2.82%

positive surprise of +0.35%

14 out of 42 companies reported

6.

Health Care

+1.95%

positive surprise of +1.05%

29 out of 51 companies reported

7.

Industrials

+1.43%

positive surprise of +0.86%

40 out of 60 companies reported

8.

Materials

(-0.90%)

positive surprise of +1.55%

21 out of 30 companies reported

9.

Utilities

(-3.56%)

negative surprise of (-10.68%)

6 out of 31 companies reported

10.

Energy

(-13.14%)

negative surprise of (-2.76%)

20 out of 43 companies reported


S&P 500 Index (SPX) Earnings Growth (254 companies reported)

Overall:  +9.19%, positive surprise of +4.91%

1.

Financials

+60.46%

positive surprise of +13.61%

46 out of 81 companies reported

2.

Materials

+17.05%

positive surprise of + 7.83%

21 out of 30 companies reported

3.

Utilities

+14.11% 

positive surprise of +4.60%

6 out of 31 companies reported

4.

Cons Staples

+9.45%

positive surprise of +3.92%

14 out of 42 companies reported

5.

Energy

+5.14%

positive surprise of +3.66%

20 out of 43 companies reported

6.

Cons Discret

+4.20%

positive surprise of +4.77%

28 out of 82 companies reported

7.

Technology

+1.76%

positive surprise of +4.08%

47 out of 70 companies reported

8.

Health Care

(-3.03%)

positive surprise of +2.68%

29 out of 51 companies reported

9.

Industrials

(-5.15%)

positive surprise of +0.41%

40 out of 60 companies reported

10.

Telecom

(-9.26%)

negative surprise of (-9.43%)

3 out of 8 companies reported


Figure 1.1 S&P 500 Index (SPX) February 2007 to February 2013

Source:  Bloomberg

Figure 1.2 Russell 2000 Index (RTY) February 2007 to February 2013

Source:  Bloomberg


Figure 1.3 S&P 500 Index (SPX) October 2012 to Present

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.