The Q2 earnings season is effectively over, with results from
451 S&P 500 companies, accounting for almost 91.9% of the
index’s total market capitalization, already out (as of Friday,
August 9th). We have already seen Q2 reports from 9 of the 16 Zacks
sectors, including Finance, Energy, Basic Materials, and
Utilities.
This week brings in reports from a total of 126 companies,
including 13 S&P 500 members. The Retail sector, which
typically has non-calendar quarter ending periods, has the most
number of companies still to report Q2 results. In fact, 47% of the
S&P 500 companies whose results are still awaited belong to the
Retail sector. This week’s line-up of reports has a heavy Retail
sector representation, with Wal-Mart (WMT), Macy’s (M), Nordstrom
(JWN), and Kohl’s (KSS) reporting results. Other notable companies
reporting this week include Cisco (CSCO) and Deere (DE).
With the bulk of the Q2 earnings season now behind us, we are in a
good position to judge the health of corporate earnings.
Looking at the aggregate growth rates, beat ratios, and median
surprises, the Q2 earnings season isn’t materially different from
what we saw in Q1 and over the last few earnings seasons. While we
had graded the Q1 earnings season as between ‘average’ and ‘below
average’, the Q2 earnings season appears to be tracking better than
Q1 on improved revenue surprises.
But before buying into the not-so-bad earnings narrative, we should
keep in mind that strong numbers from the Finance sector are
playing an outsized role in giving respectability to the aggregate
earnings picture. One could dispute the legitimacy of the strength
in Finance earnings given the not-so-small contribution of reserve
releases to the sector’s earnings performance. But even keeping
this issue aside, there is no dispute about the broad weakness
outside of the Finance sector.
Given this broad-based growth weakness, I would give the Q2
earnings season a ‘below average’ grade, even though total earnings
for the quarter will likely reach a new all-time record.
The Q2 Earnings Scorecard
Total earnings for the 451 S&P 500 companies that have
reported results already are up +3%, with 66.3% beating earnings
expectations and a median surprise of +2.9%. Most of this growth
has come from top-line gains, with total revenues for these 451
companies up +2.1% and 55% beating revenue expectations.
The earnings growth rate of +3% compares to +2.6% earnings
growth rate in Q1 and the 4-quarter average growth pace of +2.8%
for the same set of 451 companies. The earnings beat ratio, which
was tracking a bit lower earlier in the reporting cycle, has caught
on with historical levels. On the revenue side, the growth of +2.1%
compares to +1.9% in Q1 and the 4-quarter average of +2.9% for this
group of 451 S&P 500 companies. The revenue beat ratio of 55%,
however, is decidedly better than what we saw in Q1 (43.9%) and the
4-quarter average (48.1%).
Strong results from the Finance sector are playing a big role in
keeping the aggregate Q2 data in the not-so-bad category. It is
very hard to be satisfied with the picture once Finance is excluded
from the numbers. With all of the Finance sector’s results already
in, total earnings for the sector are up +30% on +8.5% higher
revenues, with beat ratios of 76.9% for earnings and 65.4% for
revenues. Finance’s performance has been way better than what we
have seen from the group in recent quarters.
Earnings growth was particularly strong at the large national
and regional banks, with total earnings at the Major Banks
industry, which includes 15 banks like J.P. Morgan (JPM),
Bank of America (BAC), Key Corp (KEY) and alone accounts for more
than 40% of the sector’s total earnings, were up +8.4% from the
same period last year. Total earnings for the Major Banks still
remained below the group’s record tally in Q1. The insurance
industry, the second largest contributor to Finance sector
earnings, had to deal with tough comparisons, resulting in negative
growth in Q2. The brokerage firms benefited from easier comps, with
total earnings for the Brokerage/Investment Management industry up
+16%.
Not So Good Outside Finance
Strip out Finance from the reports that have come out already
and total earnings growth turns negative – down -2.9%. This is
weaker than what these same companies reported in Q1. Weakness in
the Technology sector spotlights the broad growth challenge outside
of Finance, though Basic Materials (total earnings down -11.1%) and
Energy (-12.7%) also played roles.
Total earnings for the 87.2% of Tech sector market cap that has
reported already are down -10.3% on +1.5% higher revenues, the
weakest performance from the sector in a while. Technology is a big
area, ranging from hardware makers like Apple (AAPL) and Dell
(DELL) to software vendors like Adobe (ADBE) and Microsoft (MSFT)
and chipmakers like Intel (INTC). The hardware and software
industries individually bring in roughly 45% and 35% of the
Technology sectors total quarterly earnings. In Q2, the modestly
positive growth for the software industry was more than offset by
weakness at the hardware vendors, with total earnings for the
Computer & Office Equipment industry down -6.2% from the same
period last year.
The composite Q2 growth rate, where we combine the results for
the 451 that have come out with the 49 still to come, is for +2.6%
total earnings growth on +2.2% higher revenues. Excluding Finance,
the composite earnings growth rate drops to a decline of -2.8%.
Bottom line, the earnings picture outside of Finance is very
weak.
High Expectations for Second half & Next
year
The predominant negative tone of company guidance has started
showing up in expectations for Q3 and the second half of the year.
As a result, full-year 2013 earnings growth expectations have come
down despite the typical positive earnings season outperformance in
Q2. The recent downtrend in estimates notwithstanding, there is
still plenty of room for estimates to come down.
The chart below plots the current Q3 and Q4 growth expectations in
the context of where growth has been over the last few quarters.
The current +2.5% expected growth rate in Q3 is down from +3% last
week and +5.2% in early July.
The chart below looks at the same data as is in the chart above,
but takes Finance out of the numbers. As you can see, a lot of the
expected growth in the second half of the year is from sectors
outside of the Finance sector.
Given what we have seen thus far in Q2 and in the last few quarters
from sectors outside of Finance (above chart), it doesn’t seem
reasonable to expect a strong growth ramp up later this year. What
this means is that we will see further acceleration in negative
estimate revisions in the coming weeks as companies guide lower
towards Q3 and beyond.
Monday-8/12
- Nothing major on the economic calendar.
- Sysco Corp (SYY) is the only major earnings report in the
morning, while China’s Sina Corp (SINA) will report after the
close.
Tuesday -8/13
- We will get the July Retail Sales numbers in the morning, with
expectations +0.4% ‘headline’ growth.
- Valspar (VAL) is the only notable report in the morning, while
JDS Uniphase (JDSU), will report after the close.
Wednesday-8/14
- We will get the July PPI in the morning, with expectations of
+0.5% increase on the ‘headline’ and +0.2% on the ‘core’.
- Deere (DE) and Macy’s (M) are the notable companies reporting
in the morning, while Cisco (CSCO), Agilent (A) and NetApp (NTAP)
will report after the close.
- Zacks Earnings ESP or Expected Surprise Prediction, our
proprietary leading indicator of earnings surprises, is showing
Deere and Agilent coming out with positive earnings surprrises.
- To better understand Zacks ESP report, please click here
- For more details on Zacks Earnings ESP, please check this
video. Click here.
Thursday -8/15
- A busy day on the economic calendar, as in addition to weekly
Jobless Claims, we will get the July Industrial Production and
August Philly Fed and Empire State Fed regional Fed surveys. Also
coming out is the August homebuilder sentiment survey.
- Wal-Mart (WMT), Kohl’s (KSS), Este Lauder (EL) are some of the
notable names reporting in the morning, while Nordstrom (JWN) and
Applied Materials (AMAT) will report after the close.
Friday-8/16
- We will get the July Housing Starts number in the morning, with
expectations of strong gains both on Starts as well as
permits.
- Nothing major on the economic calendar.
- Renesola (SOL) is the only notable company reporting results
today.
Here is a list of the 126 companies reporting this week,
including 13 S&P 500 members.
Company |
Ticker |
Current Qtr |
Year-Ago Qtr |
Last EPS Surprise % |
Report Day |
Time |
SYSCO CORP |
SYY |
0.55 |
0.53 |
16.67 |
Monday |
BTO |
ACELRX PHARMACT |
ACRX |
-0.25 |
-0.35 |
-30.77 |
Monday |
AMC |
ADV PHOTONIX -A |
API |
-0.02 |
-0.02 |
33.33 |
Monday |
AMC |
ALIMERA SCIENCE |
ALIM |
-0.23 |
-0.15 |
-8 |
Monday |
AMC |
ATLAS FINL HLDG |
AFH |
0.14 |
0.05 |
0 |
Monday |
AMC |
BIODEL INC |
BIOD |
-0.37 |
-0.45 |
9.76 |
Monday |
AMC |
CERAGON NETWRKS |
CRNT |
-0.19 |
0.06 |
-30 |
Monday |
BTO |
CHEMOCENTRYX |
CCXI |
-0.29 |
-0.3 |
-3.7 |
Monday |
AMC |
CONSOLTD WATER |
CWCO |
0.03 |
0.13 |
73.33 |
Monday |
BTO |
CTI INDUSTRIES |
CTIB |
0.03 |
-0.02 |
300 |
Monday |
BTO |
DERMA SCIENCES |
DSCI |
-0.42 |
-0.23 |
0 |
Monday |
BTO |
ENGILITY HLDGS |
EGL |
0.78 |
0.93 |
-11.24 |
Monday |
AMC |
EUROSEAS LTD |
ESEA |
-0.06 |
-0.04 |
-100 |
Monday |
AMC |
FABRINET |
FN |
0.26 |
0.29 |
3.7 |
Monday |
AMC |
FORTEGA FIN CP |
FRF |
0.2 |
0.2 |
-27.27 |
Monday |
AMC |
FORTUNA SILVER |
FSM |
0.04 |
0.11 |
-28.57 |
Monday |
N/A |
GOL LINHAS-ADR |
GOL |
-0.28 |
-1.32 |
-1200 |
Monday |
AMC |
GOLDEN STAR RES |
GSS |
-0.04 |
0.01 |
-250 |
Monday |
BTO |
HOME INNS&HOTEL |
HMIN |
0.35 |
0.24 |
83.33 |
Monday |
AMC |
IAMGOLD CORP |
IAG |
0.09 |
0.2 |
7.14 |
Monday |
AMC |
INTEROIL CORP |
IOC |
-0.06 |
0.16 |
161.54 |
Monday |
AMC |
LAKE SHORE GOLD |
LSG |
-0.01 |
0 |
N/A |
Monday |
AMC |
NETQIN MOBILE |
NQ |
0.08 |
0.04 |
-16.67 |
Monday |
AMC |
PERION NETWORK |
PERI |
0.3 |
0.17 |
20 |
Monday |
BTO |
PHOENIX NEW MED |
FENG |
0.06 |
0.07 |
60 |
Monday |
AMC |
RELM WIRELESS |
RWC |
0.06 |
0.09 |
50 |
Monday |
AMC |
SCIENTIFIC LRNG |
SCIL |
-0.01 |
-0.14 |
42.86 |
Monday |
AMC |
SINA CORP |
SINA |
-0.01 |
-0.01 |
45.45 |
Monday |
AMC |
SPIRIT AEROSYS |
SPR |
0.21 |
0.55 |
29.79 |
Monday |
BTO |
STARTEK INC |
SRT |
-0.09 |
-0.26 |
-314.29 |
Monday |
BTO |
TEKMIRA PHARMAC |
TKMR |
-0.24 |
-0.19 |
-28.57 |
Monday |
AMC |
TOWER GRP INTL |
TWGP |
0.49 |
-0.34 |
5.66 |
Monday |
AMC |
WUXI PHARMATECH |
WX |
0.34 |
0.28 |
11.11 |
Monday |
AMC |
JDS UNIPHASE CP |
JDSU |
0.08 |
0.1 |
-33.33 |
Tuesday |
AMC |
ALPHA&OMEGA SEM |
AOSL |
-0.22 |
0.26 |
7.69 |
Tuesday |
AMC |
AMER MIDSTREAM |
AMID |
-0.02 |
-0.1 |
-200 |
Tuesday |
AMC |
ATHERSYS INC |
ATHX |
-0.12 |
-0.13 |
-30 |
Tuesday |
AMC |
AUXILIO INC |
AUXO |
0 |
-0.01 |
-100 |
Tuesday |
AMC |
BROCADE COMM SY |
BRCD |
0.09 |
0.12 |
16.67 |
Tuesday |
AMC |
CACHE INC |
CACH |
-0.14 |
0.08 |
2.5 |
Tuesday |
BTO |
CIMATRON LTD |
CIMT |
0.13 |
0.11 |
N/A |
Tuesday |
BTO |
CINEDIGM DIGITL |
CIDM |
-0.07 |
-0.08 |
9.09 |
Tuesday |
AMC |
CLEVELAND BIOLB |
CBLI |
-0.16 |
-0.21 |
17.65 |
Tuesday |
BTO |
CREE INC |
CREE |
0.3 |
0.16 |
0 |
Tuesday |
AMC |
DOCUMNT SEC SYS |
DSS |
-0.04 |
-0.05 |
-25 |
Tuesday |
AMC |
EVOLVING SYSTEM |
EVOL |
0.03 |
0.2 |
0 |
Tuesday |
AMC |
EXONE CO/THE |
XONE |
-0.06 |
-0.4 |
-100 |
Tuesday |
AMC |
FIRST MAJESTIC |
AG |
0.1 |
0.19 |
-8 |
Tuesday |
BTO |
FLOWERS FOODS |
FLO |
0.23 |
0.15 |
6.98 |
Tuesday |
BTO |
GENTIUM SPA-ADR |
GENT |
0.02 |
0.06 |
175 |
Tuesday |
BTO |
GLOBALSTAR INC |
GSAT |
-0.05 |
-0.05 |
28.57 |
Tuesday |
AMC |
JACK HENRY ASSC |
JKHY |
0.51 |
0.5 |
3.92 |
Tuesday |
AMC |
MILLENNIAL MEDA |
MM |
-0.07 |
-0.03 |
25 |
Tuesday |
AMC |
MYRIAD GENETICS |
MYGN |
0.44 |
0.34 |
17.95 |
Tuesday |
AMC |
NETLIST INC |
NLST |
-0.13 |
-0.14 |
28.57 |
Tuesday |
AMC |
OCERA THERAPEUT |
OCRX |
-0.24 |
-2.76 |
-20 |
Tuesday |
AMC |
PFSWEB INC |
PFSW |
-0.16 |
-0.02 |
83.33 |
Tuesday |
BTO |
PHOTRONICS INC |
PLAB |
0.1 |
0.16 |
-11.11 |
Tuesday |
AMC |
PLANET PAYMENT |
PLPM |
0 |
-0.02 |
N/A |
Tuesday |
AMC |
SIMCERE PHARMAC |
SCR |
0.12 |
0.08 |
12.5 |
Tuesday |
BTO |
SUPERNUS PHARMA |
SUPN |
-0.67 |
-0.61 |
4.76 |
Tuesday |
AMC |
TEARLAB CORP |
TEAR |
-0.13 |
-0.11 |
8.33 |
Tuesday |
AMC |
TREE.COM INC |
TREE |
0.06 |
-0.14 |
-52.94 |
Tuesday |
AMC |
ULTRAPETROL LTD |
ULTR |
-0.01 |
-0.18 |
100 |
Tuesday |
AMC |
VALSPAR CORP |
VAL |
1.11 |
0.97 |
2.25 |
Tuesday |
BTO |
ZAIS FINANCIAL |
ZFC |
0.44 |
1.1 |
-66.67 |
Tuesday |
BTO |
AGILENT TECH |
A |
0.62 |
0.79 |
14.93 |
Wednesday |
AMC |
CISCO SYSTEMS |
CSCO |
0.47 |
0.42 |
4.44 |
Wednesday |
AMC |
DEERE & CO |
DE |
2.16 |
1.98 |
0.73 |
Wednesday |
BTO |
MACYS INC |
M |
0.78 |
0.67 |
3.77 |
Wednesday |
BTO |
NETAPP INC |
NTAP |
0.33 |
0.25 |
1.85 |
Wednesday |
AMC |
ADCARE HLTH SYS |
ADK |
0.04 |
0.07 |
-57.14 |
Wednesday |
N/A |
APPLD INDL TECH |
AIT |
0.76 |
0.75 |
0 |
Wednesday |
BTO |
AVIAT NETWORKS |
AVNW |
-0.01 |
0.01 |
-133.33 |
Wednesday |
AMC |
BAYTEX ENERGY |
BTE |
0.36 |
0.43 |
-112 |
Wednesday |
BTO |
CACI INTL A |
CACI |
1.61 |
1.59 |
-1.82 |
Wednesday |
AMC |
COPEL-ADR PR B |
ELP |
0.34 |
0.91 |
0 |
Wednesday |
N/A |
CROWN CRAFTS |
CRWS |
0.1 |
0.09 |
11.76 |
Wednesday |
BTO |
FAB UNIVL CP |
FU |
0.15 |
-0.04 |
N/A |
Wednesday |
BTO |
GAFISA SA-ADR |
GFA |
0.17 |
0 |
-211.11 |
Wednesday |
N/A |
GLOBAL SHIP LS |
GSL |
0.11 |
0.14 |
-50 |
Wednesday |
BTO |
GLOBAL TELECOM |
GTT |
0 |
0 |
N/A |
Wednesday |
BTO |
GSE SYSTEMS INC |
GVP |
-0.04 |
0.01 |
100 |
Wednesday |
AMC |
HOLLYSYS AUTOMT |
HOLI |
0.43 |
0.21 |
0 |
Wednesday |
AMC |
INTERLEUKIN GEN |
ILIU |
-0.02 |
-0.03 |
0 |
Wednesday |
AMC |
JINKOSOLAR HLDG |
JKS |
-0.07 |
-2.11 |
66.27 |
Wednesday |
BTO |
JINPAN INTL LTD |
JST |
0.2 |
0.14 |
75 |
Wednesday |
BTO |
LIFEWAY FOODS |
LWAY |
0.14 |
0.13 |
55.56 |
Wednesday |
AMC |
NETEASE INC |
NTES |
1.28 |
1.05 |
13.79 |
Wednesday |
AMC |
OSI SYSTEMS INC |
OSIS |
1.02 |
0.95 |
1.37 |
Wednesday |
BTO |
QUANTUM FUEL SY |
QTWW |
-0.24 |
-0.64 |
25 |
Wednesday |
BTO |
RENREN INC-ADR |
RENN |
-0.07 |
-0.06 |
85.71 |
Wednesday |
AMC |
SHARPS COMPLIAN |
SMED |
-0.04 |
-0.04 |
-33.33 |
Wednesday |
BTO |
SILVER WHEATON |
SLW |
0.27 |
0.4 |
-9.76 |
Wednesday |
AMC |
SPAR GROUP INC |
SGRP |
0.04 |
0.03 |
N/A |
Wednesday |
BTO |
SUMMER INFANT |
SUMR |
0.02 |
-0.02 |
200 |
Wednesday |
AMC |
SYNERON MED LTD |
ELOS |
0.03 |
0.02 |
90.91 |
Wednesday |
BTO |
SYNTHETIC BIOLG |
SYN |
-0.06 |
-0.05 |
0 |
Wednesday |
AMC |
TOWERS WATSON |
TW |
1.25 |
1.2 |
13.1 |
Wednesday |
BTO |
TRANSWITCH CORP |
TXCC |
-0.07 |
-0.17 |
-40 |
Wednesday |
AMC |
VERTEX ENERGY |
VTNR |
0.05 |
-0.02 |
N/A |
Wednesday |
N/A |
VIPSHOP HOLDNGS |
VIPS |
0.11 |
-0.11 |
1100 |
Wednesday |
AMC |
WIDEPOINT CORP |
WYY |
-0.01 |
-0.01 |
N/A |
Wednesday |
AMC |
XUEDA EDUC-ADR |
XUE |
0.23 |
0.2 |
-25 |
Wednesday |
AMC |
APPLD MATLS INC |
AMAT |
0.19 |
0.24 |
23.08 |
Thursday |
AMC |
ESTEE LAUDER |
EL |
0.23 |
0.17 |
36.36 |
Thursday |
BTO |
KOHLS CORP |
KSS |
1.04 |
1 |
15.79 |
Thursday |
BTO |
NORDSTROM INC |
JWN |
0.88 |
0.75 |
-3.95 |
Thursday |
AMC |
PERRIGO COMPANY |
PRGO |
1.56 |
1.28 |
-1.39 |
Thursday |
BTO |
WAL-MART STORES |
WMT |
1.25 |
1.18 |
-0.87 |
Thursday |
BTO |
AEROFLEX HOLDNG |
ARX |
0.21 |
0.22 |
10 |
Thursday |
BTO |
ASPEN TECH INC |
AZPN |
0.05 |
-0.06 |
233.33 |
Thursday |
AMC |
BALLY TECH INC |
BYI |
0.93 |
0.78 |
10.71 |
Thursday |
AMC |
BRIGGS & STRATT |
BGG |
0.19 |
0.22 |
-17.59 |
Thursday |
BTO |
CHINA LODGING |
HTHT |
0.19 |
0.18 |
100 |
Thursday |
AMC |
CHIPMOS TEC LTD |
IMOS |
0.31 |
0.36 |
215.38 |
Thursday |
BTO |
E-COMMRC CH-ADR |
DANG |
-0.16 |
-0.24 |
21.05 |
Thursday |
BTO |
G&K SVCS A |
GK |
0.65 |
0.59 |
11.29 |
Thursday |
BTO |
GLOBAL SRCS-LTD |
GSOL |
0.43 |
0.28 |
-76.47 |
Thursday |
BTO |
HIMAX TECH-ADR |
HIMX |
0.11 |
0.09 |
14.29 |
Thursday |
BTO |
IFM INVEST-ADS |
CTC |
0.01 |
0.01 |
200 |
Thursday |
BTO |
PAN AMER SILVER |
PAAS |
0.05 |
0.04 |
4 |
Thursday |
BTO |
RED ROBIN GOURM |
RRGB |
0.66 |
0.52 |
1.54 |
Thursday |
BTO |
RENESOLA LT-ADR |
SOL |
-0.26 |
-0.4 |
-15.38 |
Thursday |
BTO |
UNWIRED PLANET |
UPIP |
-0.06 |
-0.08 |
-88.33 |
Thursday |
AMC |
E-HOUSE CHINA |
EJ |
-0.04 |
-0.03 |
89.47 |
Friday |
BTO |
ADOBE SYSTEMS (ADBE): Free Stock Analysis Report
APPLD MATLS INC (AMAT): Free Stock Analysis Report
CISCO SYSTEMS (CSCO): Free Stock Analysis Report
DEERE & CO (DE): Free Stock Analysis Report
DELL INC (DELL): Free Stock Analysis Report
INTEL CORP (INTC): Free Stock Analysis Report
NORDSTROM INC (JWN): Free Stock Analysis Report
KEYCORP NEW (KEY): Free Stock Analysis Report
KOHLS CORP (KSS): Free Stock Analysis Report
MICROSOFT CORP (MSFT): Free Stock Analysis Report
VALSPAR CORP (VAL): Free Stock Analysis Report
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