The estimated earnings growth rate for Q4 2012 is 2.9% this week, unchanged from last week. During the week, downward revisions to estimates for companies in the Financials sector were mainly offset by the upward earnings surprise reported by Oracle. On September 30, the estimated earnings growth rate for the index was 9.2%. Seven of the ten sectors have recorded an decline in earnings growth over this time frame, led by Materials, Information Technology, and Financials sectors.
In the Financials sector, almost all of the decline in the earnings growth rate can be attributed to downward revisions to estimates for companies in one industry: Insurance. Excluding the Insurance industry, there has been little change in the estimated earnings growth rate for the sector since the start of the quarter.
In terms of preannouncements, 80 companies have issued negative EPS guidance for Q4 2012, while 30 companies has issued positive EPS guidance. Of the companies in the Information Technology sector that have provided EPS guidance for the quarter, an unusually high percentage (91%) have issued negative EPS guidance.
Despite the reductions in estimates, analysts are still calling for a return to earnings growth in Q4 (2.9%) after a decline in Q3 (-0.9%). Seven of the ten sectors are projected to report earnings growth for the quarter, led by the Financials sector (16.5%) sector. On the other hand, the Industrials (-4.5%) and Information Technology (-2.4%) sectors are predicted to have the weakest earnings growth. In the Information Technology sector, Apple is predicted to report a year-over-year decline in EPS for the first time in over nine years. The current revenue growth rate for the index for Q4 is 2.2%, below an expectation of 2.7% growth at the start of the quarter. Slower economic growth in Europe and emerging markets countries (China) and less favorable foreign-exchange rates are expected to have a negative impact on both top-line and bottom-line growth for many multi-national companies in the index in the quarter. In addition, some companies have cited the damage caused by Hurricane Sandy and the tax policy uncertainty caused by the “fiscal cliff” as impediments to earnings and sales growth for the quarter as well. However, most companies that have commented on the “fiscal cliff” to date in their Q4 earnings conference calls have stated they’re either seeing little impact so far or are assuming a deal will be reached soon and are not factoring the impact into their earnings guidance for future quarters.