Earnings beating forecasts but jury's out on rest of season

Sun Apr 28, 2013 5:14pm EDT
 
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By Caroline Valetkevitch and Ben Berkowitz

NEW YORK (Reuters) - U.S. companies have easily beaten expectations for first-quarter earnings so far in the reporting season, but nearly half of the members of the S&P 500 are yet to announce results and they are unlikely to be as robust.

With results in from 271 of the S&P 500 companies, year-over-year earnings growth is projected at 3.9 percent, compared with a forecast for 1.5 percent growth at the start of the earnings season, Thomson Reuters data shows. That figure includes those that have reported and analyst estimates for those who have not.

The companies yet to report are expected to post an aggregate earnings decline of 0.4 percent, according to Thomson Reuters data - whereas the companies that have already reported have posted growth of 6.1 percent.

Among the biggest companies yet to report are Dow components Wal-Mart Stores Inc (WMT.N: Quote) and Home Depot (HD.N: Quote).

Some 69 percent of the S&P 500 have beaten forecasts, once again conforming to the pattern of lowering expectations enough to "surprise" by beating them. The 69 percent figure exceeds the long-term average of 63 percent. This has been the pattern for the last 15 quarters, with growth estimates at the beginning of earnings ultimately being beaten by at least a full percentage point.

From April 1 to April 24, S&P 500 earnings growth expectations fell 170 basis points for the second quarter, 130 basis points for the third quarter and 70 basis points for the fourth quarter.

"If this recent pattern holds, you're going to find that those beats will continue and therefore lead earnings season to be one of continued positive surprise," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.

So far, this has been good enough for investors. Since earnings season began with Alcoa's report on April 8, the S&P 500 has gained 1.2 percent, and it closed Friday less than 1 percent from its all-time high of 1,593.37 reached on April 11. So far this year, it has climbed nearly 11 percent.   Continued...

 
A man stands on a skateboard outside a Wal-Mart store in Williston, North Dakota March 13, 2013. REUTERS/Shannon Stapleton