This coming week marks the beginning of peak earnings season for the S&P 500, with 140 companies slated to report. Thus far, 73 companies have released results, of those 52% have beaten the Estimize EPS consensus and only 43% have beaten on revenues. This will be the worst EPS beat rate in our 3 years of data, and the worst revenue beat rate since Q3 2012. It should come as no surprise that the financials are the poorest performing segment thus far. Of the 17 companies that have reported only 35% have surpassed earnings expectations. On the revenue front, consumer staples is the worst performing sector, with only 33% of its 6 reporting companies beating estimates.
Friday morning we had McDonald’s (NYSE:MCD) out with their biggest miss against the Wall Street estimate in over 15 years. In addition, United Parcel Service (NYSE:UPS) issued downtrodden preliminary results, sending the stock down nearly 10%.
In addition to unexpected misses, estimates for companies that have yet to report have also been slipping, especially amongst the energy names. Currently, the S&P 500 is poised to post Q4 growth of 5.0%, with energy as the biggest laggard at -19.4%. While certain sectors are undoubtedly benefiting from lower oil prices and somewhat offsetting weakness presented by energy, that sector still weighs heavily. In fact, if you remove energy, that 5% growth rate would shoot up to 8.8%.
The aforementioned revenue misses have brought growth down to 1.2% for Q4, from the 1.9% expected in the beginning of the year. The outlook for revenues in 2015 is not stellar, with low top-line growth looking like it’s here to stay around the 2% level. Furthering the trend of suffering sales is due primarily to weakness in Europe, the stronger dollar, and some company specific reasons such as McDonald’s issues with food supply/quality in China. Strict cost management programs and share buybacks still giving a kick to the bottom-line.
How are we doing?
Expectations for S&P 500 earnings growth for the fourth quarter stand at 5.0%. Revenues are anticipated to come in with 1.2% growth.
Leaders
Earnings:
- Health Care (21.3%). Notable industry: Biotechnology (59.3%)
- Telecommunication Services (13.1%).
- Information Technology (12.4%). Notable industry: Semiconductors (30.9%)
Revenues:
- Health Care (7.8%). Notable industry: Biotech (37.5%).
- Information Technology (7.0%). Notable industry: Semiconductors (14.8%)
Laggards
Earnings:
- Energy (-19.4%). Notable industry: Oil, Gas and Consumable Fuels (-20.8%)
- Financials (-3.1%). Notable industry: Banks (-4.6%)
- Materials (-2.8%). Notable industry: Paper & Forest Products(-17.7%)
Revenues:
- Energy (-13.6%). Notable industry: Oil, Gas and Consumable Fuels (-15.8%).
- Materials (-0.9%). Notable industry: Paper & Forest Products (-18.2%).
Beat/Miss/Match
Earnings: With 30 S&P 500 companies reporting thus far, 52% have beaten the Estimize consensus, 38% have missed and 10% have met. This is compared to Wall Street estimates, of which 67% of companies have beat on the bottom-line, 21% have missed and 12% have met.
Revenue: 43% have beaten the Estimize consensus, while 57% have missed. For revenues, 57% of companies have beat the Wall Street estimate, while 43% have missed.
