41% of the S&P 500 Beating on Earnings and Revenue

With roughly 80% of Q4 2013’s earnings in, this season has been shaping up to be another good, not great one for the S&P 500. It’s good because beat-rates for both earnings and revenue are at historic levels. It’s not great because we’re talking about “beats” of numbers that have been massaged lower for months now and a fairly sluggish rate of overall growth in most cases.

The Healthcare sector has been the runaway winner, with more than half of all reporting companies beating on both sales and profits. The next best three were Financials, Tech and Industrials.

The last 20% of reports will probably not alter the percentages much. However, in the final week of the season we’ll hear from the majority of the retailers. The earnings and revision trends for both consumer discretionary and consumer staples companies have been the worst in the entire market this quarter.

Here’s Bank of America Merrill Lynch’s Equity and Quant Strategy Team with some data and a pair of charts:

With the conclusion of Week 3, 342 companies representing 80% of S&P 500 4Q
earnings have reported. Bottom-up EPS continued to rise amid better than
expected results, and now sits at $28.62 vs. $28.52 the prior week. This is 2%
higher than analysts’ expectations at the start of reporting season, and also
exceeds of forecast of $28.25. 4Q earnings growth is now tracking 7.7% YoY (7.1%
ex. Financials and Energy), and sales growth is tracking 0.4% YoY (3.4% ex.
Financials and Energy).

Overall 54% of companies have beaten on EPS, 64% have beaten on sales, and
41% have beaten on both, essentially unchanged from where stats stood last week.
Sales beats are still tracking at the highest level since 2Q11, and all three surprise
ratios are above historical average levels. Health Care has the highest proportion of
top and bottom line surprises, followed by Financials, Industrials and Tech.

…and below, the breakdown of beats by sector:

Source:

Week 4: Winding down, most sectors post good results
BofA Merrill Lynch Equity and Quant Strategy – February 10th 2014