{"id":38128,"date":"2013-05-07T01:38:41","date_gmt":"2013-05-07T05:38:41","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=38128"},"modified":"2013-05-07T01:38:41","modified_gmt":"2013-05-07T05:38:41","slug":"10-shocking-earnings-season-trends-part-1","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/05\/07\/10-shocking-earnings-season-trends-part-1\/","title":{"rendered":"10 Shocking Earnings Season Trends (Part 1)"},"content":{"rendered":"

By WallStreetDaily.com<\/u><\/a> <\/p>\n

While most investors continue to track every jot and tittle of the market to see if we hit yet another<\/em> record high, a more important situation is still unfolding.<\/p>\n

What could that possibly be?<\/p>\n

Oh, just a little something called earnings!<\/p>\n

Remember, stock prices ultimately follow earnings, and we’re still in the midst of the first-quarter earnings reporting season.<\/p>\n

Most analysts predicted that results would be terrible this go-round. On average, they expected S&P 500 companies to report a 0.7% contraction in profits.<\/p>\n

With roughly 80% of companies’ reports on the books, though, S&P 500 earnings actually grew<\/em> by 3.2% in the first quarter. The strength is broad based, too, as nine out of 10 sectors have reported stronger earnings relative to last year.<\/p>\n

Talk about a swing and a miss by analysts!<\/p>\n

What an embarrassment. However, there are<\/em> several surprises contained within the reports.<\/p>\n

Take note and invest accordingly…<\/p>\n

~Surprise #1: A Bullish Earnings “Beat Rate”<\/strong><\/p>\n

A month ago<\/a>, I told you to focus on the earnings “beat rate” (i.e. – the percentage of companies that reported better-than-expected earnings). As I said at the time, “Any reading above 58.7%, which is the low since this bull market began, should pave the way for higher stock prices.”<\/p>\n

Well, 59% of companies have beaten earnings expectations, according to Bespoke Investment Group<\/em>.<\/p>\n

If we focus on just S&P 500 companies, that number rises to 72%, which tops the average beat rate for the past four quarters of 70%.<\/p>\n

In the end, the current beat rate might not be overly<\/em> bullish. But any bullish reading still points to higher stock prices.<\/p>\n

I’m not the only one embracing this optimistic outlook, either.<\/p>\n

On Monday, Berkshire Hathaway’s<\/strong> (BRK.A<\/a>) Warren Buffett and Microsoft’s<\/strong> (MSFT<\/a>) Bill Gates took to the airwaves of CNBC, declaring that stocks are a better bargain than bonds now.<\/p>\n

~Surprise #2: So Much for the Weak Consumer<\/strong><\/p>\n

Tall tales abound about how American consumers are still cutting back on spending.<\/p>\n

But they’re not. At least, not nearly as much as analysts expected.<\/p>\n

Case in point: The consumer discretionary sector boasts the best earnings beat rate this quarter, at 64.3%.<\/p>\n

Financial stocks represent another surprising bastion of strength, with 60.4% of companies reporting better-than-expected earnings. (More on that in a moment.)<\/p>\n

\"\"<\/p>\n

~Surprise #3: Reversal of Tech Fortunes<\/strong><\/p>\n

As I mentioned before, nine out of 10 sectors in the S&P 500 have reported stronger earnings compared to last year.<\/p>\n

Of course, that now begs the question: Which sector is the lone laggard?<\/p>\n

Believe it or not, it’s technology. The sector has the lowest earnings growth rate so far of -3%.<\/p>\n

If that wasn’t shocking enough, Apple<\/strong> (AAPL<\/a>) is weighing the sector down the most, with an 18% earnings slide. While former laggard, Microsoft, is propping the sector up with a 20% profit jump.<\/p>\n

Talk about a reversal of tech fortunes!<\/p>\n

Add it all up, and the tech sector weakness means that we need to be pickier when choosing investments in the space. Speaking of which, I’ll be sharing a handful of top tech investment opportunities with readers of Tech & Innovation Daily<\/em> this week<\/a>. For free! So make sure you’re signed up to receive them.<\/p>\n

~Surprise #4: Bank on Banking<\/strong><\/p>\n

Back in March, I wrote: “The banks got us into the financial crisis. So it stands to reason that they need to lead us out, too. That recovery is undeniably underway.”<\/p>\n

Fast forward to today, and forget simply “underway.” The recovery is now gaining steam.<\/p>\n

Case in point: The crown for the highest earnings growth rate this quarter belongs to the financial sector. On average, financial companies grew earnings by 11.5%. That’s more than triple the market average.<\/p>\n

No surprise<\/a>, the biggest contributor to the earnings growth is Bank of America <\/strong>(BAC<\/a>).<\/p>\n

Even if we remove it from the results, though, the financial sector would still be in the top three – with an earnings growth rate of 7.4%, according to FactSet.<\/p>\n

On the heels of such strength, we should keep banking on bank stocks.<\/p>\n

~Surprise #5: A Little Help From Housing<\/strong><\/p>\n

I’m a broken record when it comes to the residential real estate recovery. So I figured you’d enjoy hearing different “artists” singing the same “tune.”<\/p>\n

Straight from the earnings reports (emphasis mine)…<\/p>\n