{"id":38154,"date":"2013-05-08T01:53:40","date_gmt":"2013-05-08T05:53:40","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=38154"},"modified":"2013-05-08T01:53:40","modified_gmt":"2013-05-08T05:53:40","slug":"10-shocking-earnings-season-trends-part-2","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/05\/08\/10-shocking-earnings-season-trends-part-2\/","title":{"rendered":"10 Shocking Earnings Season Trends (Part 2)"},"content":{"rendered":"

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

In yesterday’s column<\/a>, I shared the startlingly low expectations analysts had for first-quarter earnings. And, of course, their predictions were rendered totally irrelevant.<\/p>\n

For the second consecutive quarter, S&P 500 companies are on pace to grow earnings by about two percentage points more than analysts originally expected.<\/p>\n

While their ineptitude may not be all that surprising, here are five more earnings season trends that might be…<\/p>\n

Again, take note and invest accordingly…<\/p>\n

~Surprise #6: <\/strong>Europe\u2019s Woes Aren\u2019t Sabotaging<\/strong> <\/strong>Revenue “Beat Rates”<\/strong><\/p>\n

Yesterday, I focused on the mildly bullish earnings “beat rate.” Today, it’s time to turn our attention to the revenue beat rate (i.e. – the percentage of companies topping analysts’ expectations for sales).<\/p>\n

To put it bluntly, it started off in the tank at a mere 43%. Truth be told, we haven’t witnessed such a terrible reading since the height of the financial crisis.<\/p>\n

Thankfully, though, we’ve made (significant) progress. The current revenue beat rate stands at 52%, according to Bespoke Investment Group<\/em>.<\/p>\n

While that’s still below the bull market average of 60%, it’s not terrible. Especially when you consider that companies aren’t suffering massive sales declines. Instead, S&P 500 sales are off a mere 0.1%, on average.<\/p>\n

So much for “European exposure” sabotaging sales, as one Wall Street analyst boldly warned…<\/p>\n

~Surprise #7: Underpromise Now… Overdeliver in the Second Half<\/strong><\/p>\n

Out of the 80 S&P 500 companies that provided guidance, 63 lowered expectations. That works out to 79%, which is well above the average of 61% over the last five years, according to FactSet.<\/p>\n

Wall Street is wise to management’s ruse of underpromising and overdelivering, though. That’s why nobody’s rushing to lower earnings estimates for the next quarter.<\/p>\n

In fact, second-quarter earnings revisions for the S&P 500 remain in line with historical averages. They dropped 2.5% compared to the five-year average quarterly revision of -2.8%.<\/p>\n

So don’t sweat the seemingly negative guidance. Earnings growth for S&P 500 companies remains on track to accelerate in the second half of the year.<\/p>\n

And since stock prices ultimately follow earnings, that bodes well for the longevity of this bull market.<\/p>\n

~Surprise #8: No Fatigue Yet<\/strong><\/p>\n

At this stage of the bull market, you’d expect stock prices to exhibit a muted response to earnings – given that they’ve risen so much already. Think again!<\/p>\n

Based on Bespoke’s calculations, the average one-day gain for stocks after reporting earnings checks in at 0.77%. That’s sky-high compared to the 10-year average of 0.12%.<\/p>\n

~Surprise #9: Time to Hang Up on Telecom?<\/strong><\/p>\n

In terms of valuation, the S&P 500 is trading in line with historical averages. The current forward P\/E ratio for the Index rests at 14, compared to the 10-year average of 14.1.<\/p>\n

So, on average, we’re paying a fair price for stocks.<\/p>\n

If we break down the valuations by sector, though, be wary of telecom stocks, including Windstream Corporation<\/strong><\/a> (WIN). The sector boasts the highest forward P\/E ratio of 18.<\/p>\n

Depending on whether or not you own any telecom stocks, it’s either time to hang up on them – or put them on your “Do Not Call” list.<\/p>\n

~Surprise #10: Energy is (Still) Getting Cheaper <\/strong><\/p>\n

If you’re on the hunt for bargains, look no further than the energy sector. It’s the only one that experienced a decline in valuations over the last quarter.<\/p>\n

The current forward P\/E ratio checks in at a mere 11.9.<\/p>\n

Now, I’ll be the first to concede that a cheap valuation doesn’t guarantee future profits. But it certainly reduces our risk.<\/p>\n

There’s actually one corner of the energy market that I’m convinced is poised for a resurgence. So much so, that I’m getting ready to recommend that WSD Insider <\/em>subscribers push some chips in on it.<\/p>\n

Fair warning: It’s perhaps the most contrarian recommendation I’ve made all year. But that’s why the profit potential is so high.<\/p>\n

Ahead of the tape,<\/p>\n

Louis Basenese<\/p>\n

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

Original Article: 10 Shocking Earnings Season Trends (Part 2)<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

By WallStreetDaily.com In yesterday’s column, I shared the startlingly low expectations analysts had for first-quarter earnings. And, of course, their predictions were rendered totally irrelevant. For the second consecutive quarter, S&P 500 companies are on pace to grow earnings by about two percentage points more than analysts originally expected. While their ineptitude may not be … <\/p>\n

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