Pragmatic Capitalism

Practical Views on Money & Finance

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.
Got a comment or question? Feel free to contact Cullen via email here or on Twitter here.
Cullen Roche

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering asset management, private advisory, institutional consulting and educational services. He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance and Understanding the Modern Monetary System.

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