Earnings Season Update

April 27, 2009 3:00 pm

So far, earnings season is off to a good start. At least that is what we have been told. Bloomberg is showing us that upward surprises now account for 16% of the 186 companies that have already reported in the S&P 500. As the latest FASB ruling has made a mockery of earnings, we should probably strip out the financial sector. With that,  we are down to a 11% surprise, which is still respectable considering the times.

(Podcast: Listen to Professor Randall Woodbridge as he discusses his findings regarding analyst estimates)

The main surprises are primarily from the Materials sector as analysts had earnings estimates below any bar that was even thought possible. Drilling down even further into that sector,  we find that 2 companies out of the 13 that have surprised by over 100%. That is what you call BAD analysis estimates.

(See analysis of earnings season from last week HERE)


Looking back on the previous quarter (below) when markets were continuing to sour, notice the growth trend at -23%. Then, look at the above table and you will see that the EPS growth for this quarter is even worse. What’s more, it is estimated that next quarter we will see earnings growth of -33% and -27% after that.

One year from now, analysts estimate that EPS growth will turn around and we will see a 1.5% increase overall. From there we are off to the races with a 25% increase over the next two quarters. Of course this assumes that companies that are suffering will still be in business by then. The leaders at that time are expected to be the materials and consumer discretionary sectors.


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