This earnings season has a dark side
So far, companies are beating analyst expectations. But executives are downbeat about the current quarter.
About a third of the companies in the Standard & Poor's 500 Index ($INX) have reported through Monday. To date, S&P 500 earnings are up 6%. That's quite a bit better than the 2.5% earnings growth that analysts were expecting just before the start of the earnings season. About 61% of companies in the S&P 500 that have reported have come in above Wall Street earnings estimates.
The revenue picture is just as strong -- and that strength is more surprising. Sales for the S&P 500 companies that have reported are up 4%. At the start of the quarter, Wall Street analysts had grown very pessimistic. They were projecting revenue growth of just 2% for the quarter.
But there is one trend this earnings season that isn't quite so positive. Many companies that are reporting beats for the fourth quarter on earnings and revenue are then lowering guidance for the first quarter of 2013.
Caterpillar (CAT), which reported Monday morning before the market opened, is a good example of the trend. The company reported earnings of $1.91 a share (excluding a one time charge against goodwill). That was 19 cents a share above the Wall Street consensus. Revenue came in at $16.07 billion, just a bit shy of the $16.2 billion projection.
Of course, both "beats" were due to very low expectations for the quarter. Revenue, for example, fell 6.8% from the fourth quarter of 2011. The $1.91 a share that Caterpillar earned in the fourth quarter of 2012 was down from the $2.32 it reported in the fourth quarter of 2011.
But it was the company's guidance that hurt -- and that forms part of a worrying trend for the first quarter of 2013. Caterpillar told investors to expect revenue of just $14 billion in the first quarter (against a Wall Street consensus of $15.09 billion.) The company didn't give specific guidance for earnings in the first quarter of 2013 but told Wall Street to expect something lower than the $2.37 the company reported in the first quarter of 2012.
In giving that guidance for the first quarter of 2013, Caterpillar noted that dealers didn't finish working down excess inventory in the fourth quarter and had more to do before they began ordering again. Sales in China and the United States would pick up slightly but Europe remained a huge question mark.
To my ears, Caterpillar's remarks sound similar to what other companies have said about the first quarter. Listen carefully during the rest of earnings season to see if you hear a trend.
Meet MSN Money at the World MoneyShow
Is it time to give your portfolio its annual checkup? Then join thousands of investors like yourself at the World MoneyShow Orlando, which runs from Jan. 30 to Feb. 2 at the Gaylord Palms Resort in Orlando, Fla. At the world's largest investor and trader gathering, you have chances to hear from Top Stocks writers Jim Jubak, Anthony Mirhaydari and Gene Marcial, and Managing Editor Amey Stone, and dozens of other top investment experts. Registration is free for MSN Money users; sign up on the World MoneyShow website.
I don't think this is about, WHAT money we "have been making" in the Markets..
As I've been reading other places it's about GUIDANCE, from Companies that have been Reporting..
There have also been inventories building up...
Retail sales over the Season weren't bad, but may have slowed..?
Going "forward"....Some are saying or warning(they don't usually use that word), don't expect as much at end of the 1st. quarter....As what has just been reported..
Good CEOs will give fair reports to shareholders and analysts, that's what makes them "good companies"....And many are expecting a correction or pullback..??
This may be the Harbinger....And Jubak is "no dummy."
But overall in 2013, I expect a decent year...12-15%(low end) lock solid by YE.
Executives are about 95% Republicans who are still bitter about the election.Earnings are
good and the market is up like 85% with Obama.These are the good old days.Those of
us in the market are enjoying are good fortune.
Copyright © 2014 Microsoft. All rights reserved.
Do it once a year. This allows the best-performing asset classes to take off and run.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.