Optimism to Pick Up? - Analyst Blog
05 Febbraio 2013 - 10:53AM
Zacks
The ISM report today will likely give stocks the reason to
reverse some of the losses from Monday. But the relative dearth of
high-impact news over the next few days will likely come in the way
of the market's push towards new all-time highs.
That wouldn’t be indicative of a trend reversal, which continues to
be driven by broad optimism about the economy and earnings picture.
Some Europe-related headlines have started getting traction in the
market again, but that is more due to lack of news on the home
front than a full-blown resumption of Euro-zone concerns.
The overall mood seems to be of optimism, with market participants
genuinely happy with how things are shaping up. The favorable
narrative notes that potentially problematic policy pitfalls like
the 'Fiscal Cliff' and debt ceiling issue have been avoided or
deferred for the time being.
The U.S. economy is showing signs of health, China seems to be
in good shape and even Europe's situation may not be that
worrisome, notwithstanding the improving poll numbers of Italy’s
Silvio Berlusconi.
The fourth quarter earnings season currently winding down may not
be showing a lot of growth, but that should show up in the coming
quarters as the economy's growth momentum resumes. Bottom line,
investors seem satisfied that the economic and earnings picture may
not be in great shape at present, but the outlook on both counts
remains strong.
We have started seeing estimates for the coming quarters and
full-year 2013 come down in recent days. But the market is looking
for a noticeable ramp-up in earnings growth later this year,
particularly in the second half. This reflects outlook for the
underlying economy, which is also expected to show much better
growth in the second half of the year. The market’s recent positive
momentum reflects this happy outlook and will likely not reverse
till this view remains in place.
This morning’s basket of earnings reports show a mixed picture,
with Archer-Daniels Midland (ADM),
Automatic Data Processing (ADP) and
Kellogg (K) coming out with positive earnings
surprises, while Eaton Corp (ETN) missed
expectations. Disney (DIS) and
Chipotle (CMG) will be reporting after the close.
Overall though, the Q4 earnings season has been good enough, both
relative to pre-season expectations and the preceding quarter.
As of this morning, we have Q4 earnings reports from 276 S&P
500 companies or 68.2% of the index’s total market capitalization.
Total earnings for these 276 companies are up +2.7%, with 67% of
the companies beating expectations with a median surprise of
+3.1%.
Revenues are up +0.3%, with 62% of the companies coming ahead of
top-line expectations and a median surprise of +0.8%. The growth
numbers are low relative to historical averages, but the beat
ratios and median surprises are inline with what we have been
seeing in the typical reporting season.
ARCHER DANIELS (ADM): Free Stock Analysis Report
AUTOMATIC DATA (ADP): Free Stock Analysis Report
CHIPOTLE MEXICN (CMG): Free Stock Analysis Report
DISNEY WALT (DIS): Free Stock Analysis Report
EATON CORP PLC (ETN): Free Stock Analysis Report
KELLOGG CO (K): Free Stock Analysis Report
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