Key Points From the Q3 Earnings Season

Good summary of the Q3 earnings season so far via Zacks:

Key Points:

  • The bulk of the third-quarter 2012 reporting season is now behind us, with results from 460 companies in the S&P 500 already out. Overall results are weaker than what we have been seeing in quite a while.
  • Total earnings for these companies are down 2.2% from the same period last year, with only 62.6% of the companies beating earnings expectations.
  • Total revenues are down 3.6% and only 38% of the companies have come out with positive revenue surprises.
  • Unlike recent quarters, results from the Tech sector have been disappointing. Cisco’s positive surprise stands in contrast to disappointing results from industry leaders likeAmazon (AMZN – Analyst Report), Google (GOOG – Analyst Report), Apple (AAPL – Analyst Report) and Intel (INTC -Analyst Report) show. Total Tech earnings are down 4.3%, with only 61.7% of them beating earnings expectations; a significantly weaker performance than we have been seeing from the sector in recent quarters.
  • Finance and Construction are the only sectors with double-digit earnings growth in the quarter, with Finance earnings up 23.3%. Excluding Finance, total third quarter earnings for the S&P 500 would be down 6.9%.
  • Basic Materials is the weakest, both in terms of growth as well as negative surprises. Energy is a close second in terms of earnings growth, with total quarterly earnings down 19.8%.
  • The composite earnings growth rate, combining the reports that have come out with those still to come, for the third quarter is for flat growth for the S&P 500 as a whole and a decline of 4% excluding Finance.
  • Unlike the third quarter, estimates for the following quarter remain quite strong, though they have come down in recent days. Total earnings expected to be up 3.5% in the fourth quarter at present, which is a drop from the 7%-plus growth rate expected at the start of the third quarter reporting season.
  • Net margins are barely up in the aggregate, but declining once Finance is excluded. Nine of the 16 sectors have negative margin comparisons in the third quarter, including Tech.
  • Total earnings for the full years 2012 and 2013 are expected to be up 5% and 11% respectively. Revenues are expected to be essentially flat this year (down 0.8% %), but up 3.6% in 2013.

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • MC

    Third quarter earnings were also expected to be up…after everybody guided down 2 or 3 times. Q4 will be a disaster. Q1 will be worse. Just follow the bouncing ball…LAYOFFS. But hey, the 10 year note only pays 1.5%…so…stocks have to go up…right? These bond investors (Ben & Banks) are strange…aren’t they?