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REVENUE MAY UPSTAGE PROFITS THIS EARNINGS SEASON

5 October 2009 by Cullen Roche 2 Comments

From Bloomberg:

Revenue growth may be the main focus of third-quarter earnings reports in the next few weeks after so many U.S. companies exceeded profit estimates last quarter, according to Peter Boockvar, a Miller Tabak & Co. strategist.

The CHART OF THE DAY shows the percentage of companies in the Standard & Poor’s 500 Index whose earnings topped analysts’ projections, as well as the S&P 500’s performance. Bloomberg has compiled data on so-called positive surprises since 1992.

revs

In the second quarter, 72 percent of companies in the index beat projections. This percentage matched a record set during the first three months of 2004. It was the third consecutive quarterly increase, equaling the longest streak on record.

Only about 50 percent of companies in the index also surpassed revenue estimates, Boockvar wrote today in an e-mail, and investors will look for signs of sustainable growth based on sales gains. “What they deliver on the top line” for the third quarter is as much of a concern as their bottom lines, or net income, he wrote.

Companies doing business overseas have a better chance of generating revenue growth than those concentrating on domestic customers, he wrote.

The Dollar Index, tracking the dollar’s value against the currencies of six U.S. trading partners, fell 4.3 percent during the quarter. The decline made U.S. products cheaper to overseas customers and increased the value of international sales. In last year’s third quarter, the index rose 9.6 percent, its biggest jump since 1992.

Source: Bloomberg

Cullen Roche

Cullen Roche

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Comments
  • xxxxxL

    Whilst Bloomberg information are always to be treated with attention,I heard that WS will change the basic arithmetic of estimates to the number of people staying under employment in the Dow and SP 500 companies.
    The staff incremental inflows will be rewarded through stocks prices and the staff outflows severely sanctioned.

    10/06/2009 at 4:04 AM
  • hbl

    Wow, that first graph tells an interesting story… is it really true that more than half of companies have beat estimates every quarter since 1998/Q3! How to build an upwardly biased market:

    Step 1: Convince investors the market has always priced in all knowable information at all times

    Step 2: Systematically underestimate earnings

    Step 3: Surprise! Up go share prices…

    Step 4: Repeat

    Not a novel thought, I just hadn’t seen visual evidence.

    10/06/2009 at 7:13 AM