The reported earnings over the past month continued to be very good, with nearly 70% beating the current estimates. Although more are beating the beginning of the quarter estimates than during the past quarter, it looks like earnings will fall somewhat short of a record this quarter. Even so, based on the un-weighted operating earnings of the current constituents, it will likely be the second highest earnings quarter of all-time and will set a trailing twelve month earnings record.
Considering the headwinds entering into the quarter due to uncertainties surrounding the fiscal cliff, these earnings are outstanding and show continued strength in the US economy.
This three part report from Traverse City, Michigan takes a look at how the companies in the index are doing in comparison to beginning of the quarter earnings estimates, how earnings estimates are changing on a month to month and quarter to quarter basis, along with sector breakdowns on reported and estimated earnings. I have also included some comments for my readers in the Traverse City area to think about.
There was one constituent change since the January update:
S&P 500 constituent Big Lots Inc. (BIG) was removed from the index due to a market capitalization that had fallen below $2 billion, and was replaced by
S&P MidCap 400 constituent PVH Corp. (PVH). Big Lots replaced PVH in the S&P MidCap 400. Both of these companies belong to the Consumer Discretionary sector.
The only other development affecting constituent’s earnings in the past month was:
Gilead Sciences, Inc. (GILD) stock split 2-1.
All reports in this article are based on un-weighted operating earnings with the exception of those companies that no longer report operating earnings. All historical numbers have been adjusted for those that no longer provide operating earnings (all major reporting sources I use also updated these historical numbers) unless otherwise noted.
Fourth Quarter Data
The following data is based on the data I gathered during the Nov 25, 2012 update (beginning of the quarter comparison estimates) and the update completed on Feb 24, 2013, along with any later rechecks/changes after screening the data for possible errors. There will be several constituents omitted from portions of this data for various reasons and these issues are discussed in more detail in the data notes below.
I found earnings for 444 (30.20%) of the S&P 500 constituents. I have beginning of the quarter estimates for 441 of them and here is how they fared against the beginning of the quarter estimates:
There were 127 (28.80%) that missed, 33 (7.48%) were in-line and 281 (63.72%) that beat the estimates I had gathered for the beginning of the quarter comparisons. Those that beat these estimates are slightly above the historical average of about 62% that beat estimates made closer to the earnings reporting date.
In comparison to earnings estimates at the time they reported, of the 444 that had reported earnings there were 92 (20.72%) that missed, 43 (9.68%) were in-line and 309 (69.59%) that beat the earnings projections at the time they reported earnings. This is fairly far above the historical average.
Of the 127 that missed the beginning of the quarter earnings estimates; 29 (22.83%) were by $0.01, 59 (46.46%) were by $0.03 or less and 43 (33.86%) missed by $0.10 or more. The largest dollar miss of these estimates was $4.00 by Legg Mason, Inc. (LM). Six (4.72%) missed by less than 1%, 52 (40.94%) by 10% or more, 30 (23.62%) by 20% or more, 15 (11.81%) by 40% or more, three (2.36%) missed by 100% or more and one (0.79%) missed by 200% or more. The largest percentage miss of the beginning of the quarter earnings estimates was also by Legg Mason, Inc. (LM) with a miss of 727.27%.
Of the 281 that beat the beginning of the quarter earnings estimates; 49 (17.44%) were by $0.01, 117 (41.64%) were by $0.03 or less and 76 (27.05%) beat by $0.10 or more with the largest dollar beat being $2.31 by The Goldman Sachs Group, Inc. (GS). Sixteen (5.69%) beat the estimates by 1% or less, 90 (32.03%) by 10% or more, 53 (18.86%) by 20% or more, 29 (10.32%) by 40% or more, seven (2.49%) by 100% or more, five (1.78%) by 200% or more and one (0.36%) by 1000% or more. The largest percentage beat was by Teradyne, Inc. (TER) at 1300.00%. I used the beat percentage found on CNBC for Teradyne’s earnings increase, since estimated earnings at the beginning of the quarter were zero, their earnings increase could not be calculated from the beginning of the quarter data.
The 441 reported earnings gathered on Feb 24, 2013 were 3.44% higher than the projected earnings of these companies when gathered for the beginning of the quarter comparison data.
The reported earnings since the previous update were very good with the percentages of large misses falling and the percentages of larger beats increasing during the period. Unfortunately the two largest misses of the quarter were also reported during this period. These two misses account for over a third of the difference needed for a new record based on the total of the earnings of those that have already reported and the current earnings estimates of those left to report.
Although there remains a possibility that a new quarterly record will be made, it will take some very good earnings reports from the remaining constituents to do it. There will need to be several large beats and those that miss will have to miss by very small amounts. There are some left to report that could provide the large beats needed, so there is a glimmer of hope.
Most of the estimates of those left to report have increased, indicating these earnings are likely to be better than expected. During the update I noticed most of the retail sector stocks saw increases. Most of those in this sector that have already reported did much better than expected too.
These data notes apply to all three articles, although additional notes may be included in the remaining articles.
The information provided in these reports is based on the current constituents of the S&P 500, including any historical comparisons unless otherwise noted. Most historical comparisons use the constituents at the time of the past data and compare it to the present constituents. As can be seen in my reports, the S&P 500 changes frequently. I believe comparing unadjusted past data to the present constituents without adjusting this data for these changes wherever possible can be misleading.
Fourth Quarter Specific
Since Dollar General Corporation (DG), Garmin Ltd. (GRMN), Delphi Automotive plc (DLPH), Abbvie (ABBV) and PVH Corp. (PVH) were not constituents at the time I gathered beginning of the quarter comparison data for the fourth quarter, they will be omitted from beginning of the quarter comparison data.
Additional Data Notes
I continue to have difficulty finding earnings estimates for the The Mosaic Company (MOS), AGL Resources Inc. (GAS), ProLogis, Inc. (PLD), LyondellBasell Industries NV (LYB), The ADT Corporation (ADT), The Washington Post Company (WPO) and Leucadia National Corporation (LUK).
I have managed to piece most of this data together through several sources, however in any case where I find no earnings projections for these companies, I will make my own based on my research of these companies. If made, these estimates will be noted below and will not be used in earnings beat/miss or increase/decrease counts, instead counted as inline or omitted in these respective tallies; however they will be used in any other data I provide, unless it skews the data and in such case the omission will be noted.
In the absence of estimated earnings for The Washington Post for the fourth and first quarters, I have made my own. The estimate for the fourth quarter remained at $8.05 and the first quarter of 2013 remained at $6.99. The current year remained at $32 and the next full year remained at $21.99. The Washington Post’s data was omitted in any place that it would have skewed the results.
CareFusion Corporation (CFN) released earnings for the third quarter and fourth quarters since my last update. The estimate I had used for the third quarter was in-line, the estimate I had used for the fourth quarter was $0.01 low and the estimate I made for the first quarter was $0.02 higher than the current estimate.
Many of these sources were used in this article.
Have a great day trading,
Disclosure: I have investments in ABBV and PLD. I currently have no investments in BIG. PVH, GILD, LM, GS, TER, DG, GRMN, DLPH, MOS, GAS, LYB, ADT, WPO, LUK or CFN although I am interested in some of these stocks. I am currently about 87% invested long in stocks in my trading accounts.
Disclaimer: This article is intended to provoke thought about investment possibilities. Acting on the information provided is at your own risk. You are urged to do your own research, and where appropriate, seek professional investment advice before acting on any information contained in these articles.