The 4Q12 earnings season has been encouraging as a majority of S&P 500 constituents have somewhat surprisingly outpaced estimates for earnings and revenues. 72% of the 334 companies who had reported 4Q12 earnings reported actual EPS above the mean estimate, according to data from Factset published on February 8th. Information Technology and Consumer Staples were the leading sectors surpassing earnings estimates while Telecom Services and Utilities had the lowest percentage of companies reporting above the mean forecast.
Perhaps even more impressive is that 67% of companies have reported higher revenues than estimates relative to 3Q12 and 2Q12 (41% and 41%). The Financials and Health Care sectors were the two reporting the highest revenue growth while Energy was the only sector reporting negative year-over-year growth. Revenue growth outside of the US for companies was challenging mainly because of European economic weakness and less favorable foreign exchange rates but signs of improvement in China were encouraging to companies.
So the earnings season thus far has been inspiring and reassuring to financial markets. The near-term outlook however is less rosy as analysts have been busy reducing earnings growth estimates for 1H13. We will continue to monitor fundamentals along with other relevant criteria and remain steady at the helm as we navigate onward.
The remarks and observations stated here represent the views and opinions of Fund Architects, LLC, and are not intended to be construed as investment advice. Fund Architects is not responsible for any actions taken as a result of these comments. No form of compensation is received for the contents of this blog.