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.
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.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.