Over the past week, the final DJIA component (Home Depot) reported earnings for the fourth quarter. During the fourth quarter earnings season, some companies in the DJIA specifically commented on the difficult conditions they faced in Europe during the quarter. Other companies, however, stated that conditions had improved in Europe relative to recent quarters. In terms of revenue growth from Europe, what did companies in the DJIA report for numbers for the fourth quarter? Overall, eleven of the 30 companies in the DJIA provided revenue growth numbers for Europe for the fourth quarter. Of these eleven companies, nine reported a year-over-year increase in revenues. This marked a slight improvement relative to the previous quarter (8). In fact, this was the highest number of DJIA companies to report sales growth in Europe since Q4 2011 (9).
Of the 484 companies in the S&P 500 that have reported earnings to date , 71% have reported earnings above estimates. This percentage is slightly below the average of 73% recorded over the past four years. In terms of revenue, 63% of companies have reported sales above estimates. This percentage is well above the average of 59% recorded over the past four years. In aggregate, companies are reporting earnings that are 3.3% above the mean EPS estimate. This percentage is below the average of 5.8% over the past four years.
The blended earnings growth rate for the S&P 500 for Q4 2013 is 8.5% this week, slightly above last week’s growth rate of 8.4%. Upside earnings surprises reported by companies in the Consumer Discretionary and Utilities sectors were mainly responsible for the increase in the overall earnings growth rate this week. On December 31, the Q4 earnings growth rate for the index was 6.3%. Eight of the ten sectors have witnessed an increase in earnings growth since that date, led by the Materials sector.
At the sector level, eight of the ten sectors are reporting a year-over-year increase in earnings for the quarter, led by the Materials (24.6%), Financials (24.4%), Telecom Services (19.5%), and Industrials (16.9%) sectors. The Energy sector has the lowest earnings growth rate (-10.1%). The blended revenue growth rate for the index for Q4 is 0.7%, above the growth rate of 0.3% on December 31.
Corporations and analysts are lowering earnings expectations for Q1 2014. In terms of preannouncements, 84 companies have issued negative EPS guidance for Q1 2014, while 17 companies have issued positive EPS guidance. Analysts have taken down EPS estimates also, as the estimated earnings growth rate for Q1 2014 has dropped to 0.7% today from an expectation of 4.5% on December 31.
The current 12-month forward P/E ratio is 15.3. This P/E ratio is above the prior 5-year average forward 12-month P/E ratio of 13.1, and above the prior 10-year average forward 12-month P/E ratio of 13.9.
During this week, six S&P 500 companies are scheduled to report earnings for Q4 2013.
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