Earnings Season – 1Q15 – Earnings vs. Revenues

With 12% of the S&P 500 having reported, there’s enough of interest to begin Earnings Season 1Q15 Blogs.

Earnings Season 1Q15 – Earnings  vs. Revenues

The first item of note is the divergence between earnings surprises (73.3% positive surprises with an average surprise of +5.6%) and revenues, where negative surprises lead with 53.3% of the companies reporting lower revenues than expected.  The average revenue “miss” was  -1,2%.

The reasons for the differences between “top line” (revenues) and “bottom line” (earnings) are many and varied, all falling under the umbrella phrase “Expenses”.

Specifically, in the case where revenues are less than expected and earnings are more than expected, expenses are lower.  Which item(s) are causing the divergence?   The most obvious guess would be oil (and refined products).  But with only 12% of the index reporting, we’ll have to wait and see.

Bear in mind these numbers are RELATIVE TO EXPECTED results.  As revenues show shortfalls, analysts rush to review their estimates for other companies and make changes where necessary.

EDUCATION CORNER: depending on the source from which you retrieve your company’s reports, you may be viewing a single-step or multiple-step Income Statement.  To see the differences between the two, take a look at this link.  It’s 2 pages and the Professor made clear connections between the two examples.  

 What Lies Beneath: Take a look at the Sectors:

EARNINGS

At the sector level, the Consumer Staples earnings surprises are, on average +13.1% with 100% of the companies that have reported showing positive surprises.

Enerrgy companies have reported positive surprises of 11.3% on average but only 50% of the companies have reported positive surprises.

100% of Healthcare companies in the S&P 500 have reported positive surprises of 3% on average.  But only 3.6% of the sector has reported.

REVENUES

Energy has also led the Revenue surprises, but on the negative side with 100% of the companies reporting a -8% difference between expectations and actual.  (4.9% of the index’s energy cos have reported).

Industrials have also wrong sided estimates with 87.5% of the companies reporting a difference in revenunres of -7.4%.  16.7% of industrial cos in index have reported.

100% of the companies reported in the Materials sector have been negative surprises with an average of -3.7%.  13.8% of Materials cos In the S&P 500 have reported.

Divergent reports, but still early in the game.   Well, that’s all for now.  I’m going to go out and enjoy the spring night air.

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