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Q4 2012 Earnings Season update

Jan 18, 2013

Of the 54 S&P 500 companies that have reported earnings to date for the fourth quarter, 65% have reported earnings above estimates. This percentage is slightly below the average of 69% recorded over the past four quarters. In terms of revenues, 69% of companies have reported sales above estimates. This percentage is well above the average of 50% recorded over the past four quarters.

The S&P 500's blended earnings growth rate for Q4 2012 is 1.9% this week, above last week’s growth rate of 1.6%. The increase in the growth rate this week can mainly be attributed to upside earnings surprises reported by companies in the Financials sector (including Goldman Sachs, JPMorgan Chase, and Bank of America), partially offset by downward revisions to estimates for companies in the Telecom Services sector (including Verizon and AT&T). On December 31, the earnings growth rate for the index was 2.6%. Six of the ten sectors have recorded an decline in earnings growth over this time frame, led by the Telecom Services and Financials sectors. The Materials sector has witnessed the largest increase in earnings growth since the end of the fourth quarter.

Q4 2012 Earnings: Above, In-Line, Below EstimatesAfter reporting a decline in earnings growth in Q3 (-1%), the index is reporting earnings growth of 1.9% for Q4. Seven of the ten sectors are reporting earnings growth for the quarter, led by the Financials (12.2%) and Utilities (8.9%) sectors. On the other hand, the Industrials (-4.8%), Information Technology (-2.9%), and Health Care (-1.9%) sectors are reporting the weakest earnings growth. The blended revenue growth rate for the index for Q4 is 2.2%. Slower economic growth in Europe and emerging markets countries (China) and less favorable foreign-exchange rates had 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 fiscal policy uncertainty as impediments to earnings and sales growth for the quarter as well.

Corporations and analysts have begun lowering earnings expectations for Q1 2013. In terms of preannouncements, 10 companies have issued negative EPS guidance for Q1 2013, while just one company has issued positive EPS guidance. The estimated earnings growth for Q1 2013 has dropped to 2.2% today from an expectation of 2.5% on December 31.

The upcoming week marks the first peak week of the Q4 2012 earnings season, as 11 Dow components and 80 S&P 500 companies are scheduled to report earnings for the fourth quarter.

Read more about the earnings trends of the S&P 500 and what to expect this earnings season in this week's edition of FactSet Earnings Insight. Visit www.factset.com/earningsinsight to launch the latest report.

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