EPS and Sales Surprises For S&P 500 Companies – How It Will Resolve

October 25, 2012 9:50 am

As we have been writing about, earnings season has not been too kind to stocks. Company after company have either missed or just beat estimates. More importantly, many have guided out lower and have showed a significant concern about the near-term outlook.

Below are two tables. The first is the previous quarter’s earnings and sales surprises for the S&P 500 companies (ex-financials):

The following table is this quarter’s earnings and sales surprises for the same group, through today. Note that sales are missing significantly and that is not a good sign for margins as many input costs rise. This will either be resolved in one of a few ways:

 

  1. Companies will restart layoffs
  2. Management may decide to raise prices
  3. Analysts will lower EPS expectations (stocks decline)
  4. Earnings will decline

Something will have to give…

 

  

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