This is the third part of the three part series providing S&P500 earnings reports from Traverse City, Michigan. In this report we will look at how earnings and earnings projections are doing in comparison to previous time periods and on a sector basis along with projections for next quarter. I also included some interesting points at the close of the article for investors in the Traverse City area to think about.
Unless otherwise noted, the numbers in this report are based on the un-weighted operating earnings of the current constituents of the S&P500. The current constituent’s historical earnings are used in any historical comparisons such as quarter over quarter or year over year.
The Fourth Quarter’s Earnings
The fourth quarter reported earnings and earnings projections of those yet to report decreased by 0.59% under the December projections of the then current constituents. The decline seen this past month is mainly due to the constituent change and stock splits along with a overall decrease in earnings projections with these negative factors partially offset by much better than expected reported earnings to this point.
The fourth quarter earnings are expected to increase 3.88% over the earnings reported the same quarter a year ago.
The largest increases over the year ago earnings are expected in Consumer Discretionary (9.38%), Consumer Staples (7.08%) and Materials (6.37%). Decreases compared to the year ago reported earnings are expected in Telecommunications Services (-26.09%) and Industrials (-3.04%) with all other sectors expected to see increases, the smallest increase expected in Financials (0.65%).
Overall the fourth quarter earnings are expected to decrease 5.49% below the reported earnings of the third quarter.
Currently the only increase in quarter over quarter earnings is expected in Information Technologies (13.71%) with all other sectors expected to see decreases, the smallest being in Consumer Discretionary (-1.52%) and Consumer Staples (-1.85%). The largest decreases in the quarter over quarter earnings are expected in Telecommunications Services (-46.03%), Utilities (-36.13%) and Financials (-16.47%).
The First Quarter’s Earnings Projections
The earnings in the first quarter of 2013 are expected to increase 4.60% over the earnings reported the same quarter a year ago.
The largest increases over the year ago earnings are expected in Consumer Discretionary (16.62%), Utilities (10.03%) and Telecommunications Services (8.54%). Decreases compared to the year ago reported earnings are expected in Energy (-3.60%) with all other sectors expected to see increases over the year ago earnings with the smallest expected in Financials (0.41%) and Information Technology (1.31%).
Overall the first quarter earnings are expected to decrease by 0.30% below the current estimates and already reported earnings of the fourth quarter.
Half of the sectors expect to see increases in quarter over quarter earnings, with the largest increases expected in Telecommunications Services (58.82%), Utilities (25.00%) and Materials (21.43%). The largest decreases in the quarter over quarter earnings are expected in Consumer Discretionary (-22.19%), Consumer Staples (-7.76%) and Information Technology (-5.65%).
Without the large drop in expectations from Legg Mason (LM) mentioned in part one, the index would have seen an increase in the already reported and expected earnings in the fourth quarter over the previous month, however this increase was still less than I anticipated since those that have already reported were doing quite well. There were a few other areas that jumped out at me as I was gathering this data.
The Telecommunications Services Sector saw a large percentage drop in reported earnings compared to the estimates, but the sector is small and although the earnings miss looked large, it was not and these misses were easily made up elsewhere.
Most of the constituents in the Energy Sector and many in the Utilities Sector saw reductions in fourth quarter earnings projections during the past month too.
Although all but one that had reported in the Energy Sector at the time of this update beat or reported in-line with these lowered projections, 50% of those that beat missed the beginning of the quarter estimates. The past week saw a larger number of this sector report, and most thumped the lowered projections soundly.
None of the Utilities had reported at the time of this update, but several reported in the past week and most of those that reported smashed the lowered estimates too.
The chances that a quarterly earnings record will be made took a hit when Legg Mason (LM) reported Friday, and missed the already lowered again, lowered projections. It will probably make a record earnings quarter very difficult to obtain, and although not impossible, earnings will have to be better than the great earnings we are already seeing to make it. A miss of this record is not an indication that earnings are not doing well, as the bar was quite high to begin with. The fourth quarter of last year also fell just short of a new quarterly record, but we saw the record fall twice after that miss in 2012.
Many of these sources were used in this article.
Have a great day trading,
Disclosure: I do not have any investments in LM. I am currently about 89% 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.