This is the second part of the three part series providing S&P500 earnings reports for Traverse City, Michigan. In this report we will look at how earnings projections are doing in comparison to previous time periods and on a sector basis. I also included some comments at the close of the article for investors in the Traverse City area to think about.
Next year’s projections
Overall the un-weighted next full year forward earnings projections that were gathered on Dec 24, 2012 decreased by 0.08% under those gathered on Nov 25, 2012. As discussed in part one, the earnings estimate adjustments I made to The Washington Post Company (WPO), increased this percentage by about 0.14%.
The next full year forward projections increased on 142 (28.40%) of the constituents, of these 19 (13.38%) had increases of $0.10 or more and 66 (46.48%) had an increase of $0.01. There were nine (6.34%) that had increases of 10% or more and 96 (67.61%) had an increase of less than 1%.
The projections remained the same on 184 (36.80%) of the constituents.
The projections decreased on 174 (34.80%) of the constituents, of these 30 (17.24%) had decreases of $0.10 or more and 60 (34.48%) had decreases of $0.01. There were nine (5.17 %) that had decreases of 10% or more and 90 (51.72%) had a decrease of less than 1%.
Of the 142 constituents with increases Materials (36.67%), Consumer Discretionary (32.53%) and Industrials (31.67%) had the highest rate of constituent increases. Financials (23.46%), Telecommunications Services (25.00%) and Health Care (25.00%) had the lowest rate of increases.
Of the 174 constituents with decreases Energy (72.09%), Telecommunications Services (50.00%) and Materials (43.33%) had the highest rate of decreases. Consumer Staples (16.67%), Utilities (19.35%) and Health Care (25.00%) had the lowest rate of decreases.
Of the 184 constituents that remained unchanged Utilities (54.84%), Consumer Staples (54.76%) and Health Care (50.00%) had the highest rates that remained the same. The lowest rates of unchanged earnings were seen in Energy (0.00%), Materials (20.00%) and Telecommunications Services (25.00%).
The largest earnings projection increases seen between this and the last reported period were seen in Utilities (0.98%), Consumer Discretionary (0.64%) and Telecommunications Services (0.52%). The largest earnings projection decreases were seen in Energy (-1.51%), Materials (-0.75%) and Information Technologies (-0.45%).
The largest earnings projection increases over the projections of a quarter ago were seen in Consumer Discretionary (2.08%), Financials (1.43%) and Health Care (1.32%). The largest earnings projection decreases were seen in Materials (-4.32%), Energy (-3.41%), and Industrials (-3.21%). Overall there was a decrease in earnings projections of 0.37% under those a quarter ago.
The following is based on the beginning of quarter earnings estimates as outlined in Part 1 of this report. Three companies will be omitted when they report earnings. AbbVie Inc. (ABBV) has not yet been added to the index and the company it will replace was used in the data for this report.
The 25 constituents that had reported earnings in the fourth quarter at the time of this update are not enough to make the data format normally used in this section of the report meaningful. Since the early reports often hold clues to how the overall sector might report, I instead included all data for the sectors that have reported below, beginning with the sector with the highest beat percentage.
Consumer Discretionary with 7 of 83 reporting (three will be omitted when they report) had 85.71% of those reporting beat the beginning of the quarter estimates and 14.29% miss these estimates. Based on the estimates of those that have reported, the sector has so far reported earnings 0.63% above the beginning of the quarter estimates.
Consumer Staples with 5 of 42 reporting had 80.00% of those reporting beat the beginning of the quarter estimates and 20.00% miss these estimates. Based on the estimates of those that have reported, the sector has so far reported earnings 0.27% below the beginning of the quarter estimates.
Information Technologies with 7 of 70 reporting had 57.14% of those reporting beat the beginning of the quarter estimates, 14.29% missed and 28.57% were in line with these estimates. Based on the estimates of those that have reported, the sector has so far reported earnings 1.82% above the beginning of the quarter estimates.
Industrials with 5 of 60 reporting had 40.00% of those reporting beat the beginning of the quarter estimates, 20.00% missed and 40.00% were in line with these estimates. Based on the estimates of those that have reported, the sector has so far reported earnings 2.78% above the beginning of the quarter estimates.
Financials with 1 of 81 reporting saw this constituent miss the beginning of the quarter estimates. Based on the estimates of this constituent, the sector has so far reported earnings 2.73% below the beginning of the quarter estimates.
Overall the 25 reporting constituents beat the beginning of the quarter earnings estimates by 0.99%.
The past week saw manufacturing data come in better than expected. Although the Industrial Sector did not beat estimates at as high a percentage as many of the other sectors, the five that reported beat the beginning of the quarter estimates by the largest dollar amount and percentage. The better than expected manufacturing data makes it seem possible that this sector could continue to do well with earnings this quarter.
The past week also saw retail sales numbers come in lower than expected, although they are expected to increase over the year ago levels. These estimates look amiss according to other data I collect; therefore I think it is possible that they might be revised higher later. Consumer Discretionary and Consumer Staples have done well beating earnings estimates to this point, and if the retail numbers are indeed lower than they should be, these sectors will probably continue to do very well with earnings reports later.
Several in the Information Technologies sector reported increased orders during the holiday shopping season. Although those that have reported so far are not beating the beginning of the quarter estimates at a high rate, those that are reporting higher are beating the dollar amount of these estimates at a pretty good clip. Many of the estimates in this sector look too low given the data I have collected to this point. Although we will probably not see 80% of the sector beating the estimates, it looks like there could be some really good picks in this sector and it will probably finish better than it has started.
The energy sector continues to see forward estimates fall at a high rate, but most in the sector continue to look overpriced to me. I own nothing in this sector, although I do own some of the oil product retailers. The fall in oil prices I believe is possible would probably not hurt the retailers; and it could possibly increase retail profits. Most in this sector would probably see profits fall if this drop in prices occurs, even some of those not in the oil industry.
The materials sector has seen forward estimates continue to fall too, but many of the constituents appear to have fallen to very low prices in comparison to these estimates. It seems possible these estimates might also be becoming too low.
The fourth quarter is an off earnings quarter for many of the constituents, but many of those that have already reported did quite well. If seems possible others that normally report lower earnings this quarter will also.
The data appears somewhat mixed on those that normally do well in the fourth quarter, but I tend to believe they will probably do well.
Many of these sources were used in this article.
Have a great day trading.
Disclosure: I am currently about 95% long in stocks in my trading accounts. I do not current own any shares in ABBV, but will when issued after the spin-off completes.
Disclaimer: This article is intended to provoke thought about investment possibilities. Acting on the information provided is at your own risk. You are urged to do your own research and where appropriate, seek professional investment advice before acting on any information contained in these articles.