4Q14 Earnings Season – Wrap It Up

Like my girl Iggy (as in Iggy Azalea) says, “First things first…I’m the realest…”

Should that allusion elude you it means I’m about to speak the truth.  I use the S&P 500 as a means of compiling statistics which are understandable and easy to digest.  But I miss so much of the market out there.  Should I use Russell?  Maybe.  We’ll see next quarter.

For now, let’s finish up this quarter and see what the S&P 500 and its sectors threw down and what kind of tone that will give us for the quarter ahead.

Earnings Summary

With 88% of the index reporting, let’s wrap it up and take a look at the earnings seasons numbers as a whole.

68.2% came with positive surprises with an average positive surprise of 4.4%.  Compared to an average surprise of 6.6% over the past 10 quarters 4Q14 is below average.

Revenue Summary

Revenue, Sales, Top Line – call it what you like showed typically stable figures in the main.  57.4% showed better than estimated revenues with the average being 1.5%.  Average revenues over the past 10 quarters have exceeded expectations by an average of .6%.  Versus this quarters “beat” of 1.5%, revenues were under-guided, under-estimated or truly stronger than expected this quarter.

 

What Lies Beneath: Earnings Sector Watch

It’s no surprise that financials EPS were weaker than expected.  What with higher than expected Funding Valuation Adjustment and other issue beyond the scope of this blog, financials will have a rough go to find their footing in this market going through what best can be called a sea change.  Also on the weaker side were telecom services (-.3%) and consumer staples(+.9%).

4Q14 Earnings

 

          Source: FACTSET http://www.factset.com

Materials finished the quarter beating consensus earnings estimates by 10%!  Newmont Mining reported $.17 vs $.10; Monsanto ($.47 vs $.34); Sealed Air ($.52 vs. $.47) and Dow Chemical ($.85 vs. $.69) to name the top performers in the sector.

Consumer discretionary earnings beat estimates by 8.3%. Netflix reported $1.35 versus $.45; Pulte Group ($.58 vs $.40); and GM ($1.19 vs $.83) were the top three Earnings Surprises.

What Lies Beneath: Revenues Sector Watch

In spite of negative reports from Exelon only 3 of the 22 firms which cover the company rated it a “sell” and Revenues grew 7% more than consensus expectation.  However a look at the bottom line shows the costs Exelon paid when several of their nuke generators went offline in the middle of the cold snap.  Energy expected to see revenues shrink by 19% on average on shrank by 13% – counting for good news I some parallel universe.

4Q14 REV Sectors

`                                               Source: FACTSET  http://www.factset.com

Looking Ahead – 1Q15

For 1Q15, 81 companies issued negative earnings guidance, while 15 companies issued positive earnings guidance.  So what this tells us is 404 companies gave neither positive or negative guidance.  They simply expect the world to keep spinning around and around, along with their earnings.  Time will tell..

The current 12 month forward P/E ratio of 17.2 (based on Thursdays index price 1220.74 and 12 month for EPS ($122.73) versus 10 yr average of 14.1 forward p/e.  (source: Factset)

BLOGDIAG_4Q14_12mFWDpe

I like this chart and I do hope FactSet doesn’t mind my using it.  This quarter I’m drawn to the malaise of the 12 mo forward P/E line relative to the almost parabolic index price line.  One of them is valuing tomorrow properly.

I don’t suspect the next few months to show us towering strength preparing us for the cyclical repair we’ve all been waiting upon

Perhaps it’s the snow and slush and the temperature going from 40 degrees to 10 degrees and back again.  Perhaps I’m trading too much oil or not drinking enough coffee.  But I’m decidedly – meh- about 1Q15 from an earnings point of view.  Maybe the cobwebs will fade over the next few months.  But for now, I’ll think about today.

The only thing I am sure of this Monday morn is that if I enjoy some really loud music (Blondie, perhaps?); then make my way to the gym for pilates and meditation I’ll be good and ready for the US opening.

Sounds like a plan…..  OK, I’m outta here.  Enjoy the day everyone!

Cheers and no fears my friends!

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