Third quarter reporting season closes
As the third quarter reporting season wraps up, most of the S&P 500 companies have made their quarterly financial information public, and the results are not good, as earnings are at the weakest since the beginning of the current earnings cycle in 2009. Zacks.com says this earnings season has raised credible doubts about the earnings outlook for the fourth quarter of this year and beyond.
Total earnings are down 2.2 percent from the same period last year, and revenues fell 3.8 percent, marking 37.4 percent unable to beat their earnings expectations. Excluding finance, total earnings are down 6.9 percent while revenues are down 4.9 percent from Q3 2011.
Looking forward to the fourth quarter and beyond
The tech sector was disappointing, as earnings fell 4.3 percent and only 61.7 percent beat their earnings expectations, considerably fewer than in prior quarters. Basic materials had the weakest growth, followed by energy, which had a 19.8 percent drop in earnings.
Looking at all of the S&P 500 quarterly earnings report, the fourth quarter does not look promising.
Economist Barry Ritholtz opines, “Here is the kicker: Earnings expectations for Q4 and for 2013 have yet to be ratched down in a meaningful way. Earnings expectations for 2013 are expected to be up 11%. Revenues are expected up 3.6% in 2013.”
“Caveat emptor and all that.”
The Wall Street Journal’s Paul Vigna agreed. “The consensus for next year, therefore, is a more than 10% rise from the $102.89 estimate for 2012 earnings. That’s far better than the tepid 3.9% rate for this year’s growth rate. Of course, back on Jan. 1, the consensus for 2012?s growth rate was 11.5%. So, you know, caveat emptor and all that.”
“Even with the negative outlooks by company management teams and analysts, it appears that the third quarter will be the trough in earnings and positive growth will continue over the next year,” Thomson Reuters’ Greg Harrison wrote.
