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SPX Earnings Near the Quarter Pole

07/19/2013

Approximately 102 companies in the S&P 500® Index (SPX) have reported earnings to date. Overall, SPX sales growth stands at +4% and EPS growth at +10.83% -- both ahead of consensus estimates heading into the reporting season of +3% sales growth and +5% EPS growth. Current SPX earnings per share of $104.12 and 16.23 price-to-earnings ratio equate to a new all-time SPX closing high at 1689.37. Overall 2013 SPX earnings per share estimates currently rest at $110.53.

To date, the results from financial institutions are clearly the highlight of earnings season and the catalyst for the recent SPX appreciation. I expect that theme to remain consistent as financial institutions are well positioned to continue “beating” and “raising” over the coming months. A recovery in credit and housing has provided the tailwind. Additionally, rising rates and improving capital markets have recently been introduced and will also contribute positively.

Of the 81 financial institutions in the SPX, 25 have reported with EPS growth of +39.03% and sales growth of +8.50%. Consumer finance companies have reported EPS growth of +69.16% and sales growth of +11.24%. Capital market-oriented finance institutions have reported EPS growth of +51.29% and sales growth of 19.36%. Next week, 25 more financial institutions will report, with insurance companies and regional banks dominating. Also, on Wednesday, July 24, Visa (V) will report after the close.

Collectively, 157 more SPX companies will report during the week of July 22. Halliburton (HAL) starts off on Monday as the first of 12 energy companies to report that week. I encourage investors to monitor energy earnings closely as Street estimates for the sector over the past three months have been revised lower. Sales growth has been revised lower by -3.5%, and EPS growth has been revised lower by -1.5%. I expect those estimates are too low.

Utility earnings begin to report next week with CMS Energy (CMS), American Electric Power (AEP), and DTE Energy (DTE) scheduled. SPX heavyweights Apple (AAPL) and Caterpillar (CAT) report Tuesday, while consumer heavyweight Starbucks (SBUX) reports on Wednesday.

Earnings Scorecard to Date, as of Friday, July 19, 2013

Sector

Reported

Yet to Report

EPS Growth

Sales Growth

Overall SPX

102

398

+10.83%

+3.99%

Financials

25

56

+39.03%

+8.50%

Technology

17

53

-3.17%

+4.11%

Consumer Disc

17

65

+6.57%

+6.27%

Industrials

14

48

+0.38%

+0.02%

Health Care

9

45

-5.45%

+0.58%

Energy

4

39

+18.13%

+11.83%

Consumer Stpls

9

31

+2.41%

+1.02%

Materials

6

24

-3.28%

-1.51%

Telecom

1

6

+14.62%

+4.32%

Utilities

0

31

n/a

n/a

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.