Strong banks, energy companies stand out in early earnings

Fri Jan 18, 2013 2:03pm EST
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Ben Berkowitz

(Reuters) - If the latest week of earnings season has told investors anything, it is that strong banks and energy companies are getting stronger, while weaker banks and technology companies are far from conquering the challenges they have faced in the last few years.

Any sense of optimism for 2013 has to be tempered by a steady decline in earnings growth forecasts, as well as a recent rise in companies making mass layoffs in attempts to get costs further under control.

With U.S. economic growth anemic and the uncertainties of the "fiscal cliff" still reverberating, companies that went into the fourth quarter of 2012 with some sense of momentum seem to have kept that up, while those that were on the wrong foot to begin with did not get much help.

"The takeaway is that earnings appear to be mimicking the economic recovery," said Tom Sowanick, co-president and chief investment officer at Omnivest Group LLC.

JPMorgan Chase & Co, the largest U.S. bank by assets, posted a 53 percent rise in fourth-quarter profits on growth in lending and a decline in bad loan costs. Goldman Sachs Group Inc, the largest U.S. investment bank, crushed Wall Street estimates on increasing client activity and smaller payouts to its bankers.

Meanwhile both industrial heavyweight General Electric Co and oilfield services leader Schlumberger Ltd handily beat expectations on still-booming demand for oil and gas equipment and services.

But the challenged got no relief.

Citigroup, the third-largest U.S. bank, badly missed estimates, striking such a cautious tone that analysts made no effort to hide their disappointment with the new management. Lender Capital One Financial Corp missed estimates after setting aside more money for credit card defaults.   Continued...

A man walks past JP Morgan Chase's international headquarters on Park Avenue in New York in this July 13, 2012 file photo. REUTERS/Andrew Burton/files