CHICAGO, March 3, 2014 /PRNewswire/ --Zacks.com releases the list of companies likely to issue earnings surprises. This week's list includes Bank of America (NYSE:BAC-Free Report), Verizon (NYSE:VZ-Free Report) and Travelers (NYSE:TRV-Free Report).
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Plenty of Data, But Still No Answers
The earnings season isn't over yet, with more than 230 companies including 8 S&P 500 members reporting results this week. But for all practical purposes, the reporting cycle is over now, as we have already seen results from 487 of the S&P 500 members.
Earnings aren't in focus this week; the focus is instead on the economy, with the docket full of top-tier reports. The problem is that economic data lately has been overly distorted by this year's unusually harsh winter. This week's reports, particularly Monday's Manufacturing ISM and Friday's non-farm payroll readings, will likely reflect the same type of distortions. As such, we will have a lot of data to look at this week, but we wouldn't be able to make much sense of it.
On the earnings front, the retail sector has been in focus in recent days. Confirming earlier fears, the Q4 earnings season has been a tough one for the sector. Not only has earnings and revenue growth for the sector been the weakest relative to recent quarters, but most have guided lower for the current period as well.
In fairness to Retail, they are hardly the only one suffering negative estimate revisions as 2014 Q1 estimates for most of the other sectors have been moving in that direction as well. As has been the case for more than a year now, predominant tone of management guidance was negative this earnings season as well, prompting estimates for Q1 to come down.
Q4 Earnings Scorecard (as of Friday, 2/28/2014)
Total earnings for the 487 S&P 500 members that have reported already, combined accounting for 97.5% of the index's total market capitalization, are up +9.3% from the same period last year, with a 'beat ratio' of 67.1% and a median surprise of +2.4%. Total revenues are barely in the positive column, up only +0.7%, with a revenue 'beat ratio' of 59.3% and a median surprise of +0.6%.
More companies have beat earnings and revenue expectations than has been the case in recent quarters, as the chart below shows. Perhaps expectations had fallen a bit low ahead of the Q4 reporting season.
The earnings growth rate for these 487 companies is better than what we saw from this same group of companies in Q3 and the 4-quarer average. A big contributor to the strong Q4 earnings growth is easy comparisons for three companies - Bank of America (NYSE:BAC-Free Report), Verizon (NYSE:VZ-Free Report) and Travelers (NYSE:TRV-Free Report). Exclude these three companies and total earnings growth for the S&P 500 companies that have reported drops to +5.6% from the 'headline' +9.4%, which is about where growth has been in recent quarters.
The revenue growth rate is notably weak, but that's primarily because of the Finance and Energy sectors.
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