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Earnings season update

Tuesday, February 12, 2013

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.

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Source: Factset

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Earnings Season Update

Tuesday, April 30, 2013

So far this earnings season companies are reporting earnings that are exceeding estimates, according to Factset. As of April 26, 2013, 271 companies in the S&P 500 index had reported earnings. Of these companies, 73% reported earnings that were greater than the mean estimate. However, on the downside, only 44% had topped revenue expectations.

The 73% of companies surpassing analysts’ estimates falls in line with the average over the previous four years, according to the report. The good news of this 1Q13 earnings outperformance is positive growth, which is better than the -0.7% forecasted at the end of March. The 44% of companies beating forecasted revenue growth is below the four year average of 57%.

The lack of top line growth has been worrisome to market observers. But so far, the market has not taken weak company sales in aggregate and punished investors long the market. There are many inputs that ultimately drive financial market returns and right now some data looks better than others.

We’ll see what the rest of earnings season brings and hope that analysts’ consensus forecast of better growth in the second half of the year comes to fruition.

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.

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