Negative and positive Preannouncement Chart

S&P 500 Q1 Earnings Not Too Bad: JPMorgan

S&P 500 Earnings Q1 were expected to be awful. However, now after many large companies have reported how is the Q so far? According to a new report this morning from JPMorgan, Q1 is not so different from previous quarters. They note ‘1Q13 is starting off as every quarter has for the past few years—earning revisions have been down (at 78% negative revisions, it is elevated) and of the 46 companies reporting so far, 63% beat and aggregated EPS beat is coming in around 7%. Applying a more modest beat rate of 4% derives $26.75 for the quarter (4% y/y EPS growth and 3% revs growth, ex-Energy) and $107 in annualized EPS.’

More details from the JPMorgan report below:

Overall 1Q13E EPS of $26.75, or $107 annualized…While pre-announcements negative, Street forecasts tracking like previous quarters

EPS of $26.75 forecast, or 4.5% EPS growth—not bad considering headwinds

Overall, we forecast 1Q13E EPS to come in at $26.75. This is about 4% above bottoms-up consensus of $25.73 and is about 4.5% growth year over year. How reasonable is this estimate?

  • Of the 61 S&P 500 (S&P Indices:.INX) companies to report so far, the average beat is 5%, so we assume a modest tickdown in beats.
  • Of the $1.15 increase in EPS forecast ($25.60 in 1Q12), most of this is coming from Cyclicals and Near-Cyclicals, where the average beat is running 6% or so.
  • These results are not terrible considering the continued headwinds for global growth from Europe (still languishing) and China. Moreover, US results suffered from uncertainty related to sequestration and tax

As bad a recession reading…Negative preannouncements remain high, relative to 4Q12 and to LT avg…

Negative preannouncements for S&P 500 (S&P Indices:.INX) 1Q earnings season continue to be elevated, and appear to have deteriorated slightly compared to 4Q12. 78% of preannouncements have been negative so far for 1Q13, up from 69% in 4Q12. This is still well above the long-term average of 57%, highlighting the impact of macro headwinds from the global economy.

Negative and positive Preannouncement Chart S&P 500 Earnings Q1

… But 1Q revisions are the least severe since 1Q12

To put the downward revisions to S&P 500 Q1 earnings estimates in perspective, we compared the trend in the 1Q13 estimates to the trend in quarterly EPS estimates over the past few quarters.

  • The downtrend in S&P 500 Q1 earnings estimates is similar to the trend seen for 1Q12, where estimates were revised downward in the earlier parts of 3 months heading into earnings and tapered off as the reporting season started. In the case of 1Q12, revisions rebounded sharply as companies reported earnings and  beat estimates.
  • This sets up some room in 1Q13 for an S&P 500 (S&P Indices:.INX) earnings beat.

Changes in 1Q13 estimates Chart

LEAVE A COMMENT


Saved Articles
X
TextTExtLInkTextTExtLInk

The Life and Career of Charlie Munger

Charlie is more than just Warren Buffett’s friend and Berkshire Hathaway’s Vice Chairman – Buffett has actually credited him with redefining how he looks at investing. Now you can learn from Charlie firsthand via this incredible ebook and over a dozen other famous investor studies by signing up below:

  • Learn from the best and forever change your investing perspective
  • One incredible tidbit of knowledge after another in the page-turning masterpiece of a book
  • Discover the secrets to Charlie’s success and how to apply it to your investing
Never Miss A Story!
Subscribe to ValueWalk Newsletter. We respect your privacy.

Congrats! Are you a smart person?

We have an exclusive targeted for being a sophisticated and loyal reader.

Welcome in the new year by signing up up for ValueWalkPremium today and get our exclusive content for 40% off. This is our second biggest discount ever!!

Use coupon code VIP20 or click on the button below

Limited time offer only ENDS 1/31/2019 or after next 30 23 subscribers take advantage whichever comes first – please do not share this discount with others

 

0