Ugh! 3rd-quarter earnings look mediocre

Earnings growth is modest at best as companies have struggled to show rising revenue. The dollar is a big part of the problem. So is economic weakness in Europe and China.

By Charley Blaine Nov 15, 2012 2:57PM
The third-quarter earnings season is done, at least unofficially, and here's the bottom line about it: mediocre.

Wall Street sees better results in the fourth quarter, but that's not a certainty. The first quarter of 2013 may be problematic as well.

It has been a trying quarter because earnings have mostly beaten estimates, but estimates were trimmed as time went on, according to Thomson Reuters I/B/E/S.
In January, analysts were expecting companies in the Standard & Poor's 500 Index ($INX) to show 6.6% earnings growth in the third quarter over a year ago. With 466 companies reporting as of Thursday morning, earnings have shown no growth. That's a bit of an improvement. As of Oct. 1, analysts had expected earnings to fall 2.1% from a year ago.

Some 64.6% of companies' earnings per share have beaten estimates. In a typical quarter, 62% of companies beat estimates.

Energy and materials companies have seen the most pressure on earnings, largely because of falling commodity prices.

Revenue has been the big problem. Only 38.7% of S&P 500 companies have beaten sales estimates. Typically, 62% of companies beat revenue estimates.

A big weight on revenue has been a stronger dollar that has depressed the value of sales generated outside the United States, says Thomson Reuters analyst Gregory Harrison. Add to that a slower Chinese economy.

Telecommunications companies have reported better-than-expected revenue, perhaps because of the big growth coming in smart-phone usage. About 63% of companies in the sector beat revenue estimates.

Utilities have seen the least revenue growth. Only 10% of that group reported better-than-expected revenue.

You can see these issues at work in Thursday's earnings report from Wal-Mart (WMT). The retail colossus earned $1.08 a share, up 11.4% from a year ago. The earnings beat the Street estimate by a penny.

Revenue of $113.2 billion was up 3.4% from a year ago but missed the Street estimate by $1.8 billion. And the higher dollar cut reported revenue by $1.7 billion.

Wal-Mart's guidance was a bit weak, and the shares were down $2.61 to $68.70. The decline subtracted 20 points from the Dow Jones Industrial Average ($INDU), which was up 14 points to 12,585 at 1:54 p.m. ET after falling as many as 70 points early in the session.

Rival Target's (TGT) shares were up $1.35 to $62.73. It has little non-U.S. exposure yet. It will starting next year when it starts to open new stores in Canada. Earnings were 96 cents a share, including 15 cents for the sale of its credit-card business. Revenue was up 3.4% to $16.6 billion.

The moral of the story: Companies with than non-U.S. exposure in the quarter showed better results than multi-nationals that generate significant sales outside the United States.

Were companies stupid to look for growth in Europe and China? Of course not, Harrison said. China has been one of the great engines of growth in the last few years and may reclaim that role next year. And few people expected the European debt crisis to put the continent into what looks like a rolling recession that may take some time to overcome.

We say the earnings season is unofficially done because Wall Street looks at the earnings season as the period between when Alcoa (AA) reports (on Oct. 9 for the third quarter) and when Wal-Mart Stores (WMT) and Target (TGT) report.

There are big reports yet to come. Best Buy (BBY) Hewlett-Packard (HPQ), (CRM) and Deere (DE) report next week. Costco Wholesale (COST) Oracle (ORCL) and Nike (NKE) report in December.

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Nov 15, 2012 9:39PM

Obama had the so called patriotic rich to the White House today. Those who want to pay more INCOME tax. Thats a scam.Watch how fast they will abandon ship if you advocate taxing their WEALTH which is in tax sheltered trusts.

John Kennedy was right, we will get the government we deserve.

Nov 15, 2012 9:35PM

A small business owner, Democrat or Republican, black, white, asian, hispanic, male, female, tea partier, independent should be very careful about buying into the Im from government and I am here to help you. Many partisan , whether dem or repub, dont yet fully understand how whats   coming down the road from Washington will threaten their survival. Taxes, health care, environmental and all kind of regulations will know no party allegiances.

Everyone is in this together but few realize it The 6000 regulations ready for implementation will adversely affect eneryone but especially small business, the only consistent engine of job growth.

WE ALL need to band together, practice our civil duty and pressure government, all branches and departments, to act with sanity and responsibility.

Politicians have successfully divided us by framing every opposing idea as racist, radical, rich mans, hurting the poor, denying civil rights, offensive to some interest group, whether local or foreign, war on women, the elderly, mentally ill, handicapped, etc etc.. Regardless of how legitimate, or not, any of these groups claims may be, the funding has a single source and it isnt the government. Its the successful participants in commercial enterprises that pay the taxes. Sustainable long term job growth like we get in manufacturing and small business entities is the ONLY way to sustain the safety net for those in need and legitimately entitled to benefits.

Phony short term jobs created by stimulus will always disappear once the subsidy is out of money. We dont have to hug and hold hands but we do have to band together for survival by rejecting politicians script that is force fed to us.


Nov 15, 2012 11:03PM
Well, sadly enough the Obummer selloff continued today...Bad economic news of course didn't help at all...We were able to close the gap a bit before the close but who are we fooling, it was another horrible day for most Americans and not a bad day for most scumbags here on the floor....Like one of these manipulators put it: Thank you mr. president...Sad.
Nov 16, 2012 5:28PM
Well, we were able to finally have an all green day...Scumbags just took a break, don't worry, they will be back ready to cheat and manipulate next week...Market turned around when Speaker Boehner spoke and luckily we were able to hold despite their last attempt to bring us down before the close. Next week will be tough once again though....Oh well...Have a great weekend all.
Nov 16, 2012 4:57PM
Trying to break this losing streak, unfortunately at 1540 hrs these scumbags called to sell off again....See if we can hang till the end....More after the close
Nov 16, 2012 10:57AM
Friday morning and the futures were up...How exciting, pure bs, futures have been up almost every day this week to try to lure people in; when the bell rings its a completely different story....Manipulators keep riding the Obummer selloff so we just opened up and we are down almost 35 points already and counting....This is an extremely oversold market folks...Scumbags having a ball and thanking Obummer every step of the way....Oh well, as usual, lets see if this afternoon something good can be done....We can not get over how grave was the mistake of reelecting this socialist piece of garbage...Sad.
Nov 15, 2012 10:43PM

"A big weight on revenue has been a stronger dollar that has depressed the value of sales generated outside the United States, says Thomson Reuters analyst Gregory Harrison. Add to that a slower Chinese economy."


Unless you are selling into the sub-economy, then your activity is fairly stable to robust. Organized business is top-heavy, over-administrated and too focused on the bookkeeping. You can't win when you are fueling your replacement. Go ahead and rely on temporary help, you go down when it goes.

Nov 15, 2012 5:19PM
We have no economy because Republicans are holding us hostage. Why would anyone expect 3rd Quarter results to be any better? Free us from REPUBLICANS!!!
Nov 15, 2012 6:10PM

"Wall Street sees better results in the fourth quarter, but that's not a certainty."


Just surfing articles here on msn over the past few days one can read about all the **** platform businesses run by angry whiny immature Republicans that will lay off personnel because they need a twentieth home or eighty fifth BMW instead of affordable healthcare for worker-customers... and all of the formerly iconic businesses (Sears, Penneys, Hostess, et al...) now administratively run into the ground and pillaged... that anticipate failure and preparing for the worse... where does Wall Street see potential results? Do they think millions of Americans will OD credit cards on cheap China junk?


Come on, Wall Street.. if even ONE of you pariah gets a bonus, you can expect a million family march and gridlocking protest at your home and office! Who you gonna call? The FAMILIES of the protesters? The NRA? The Tea Party? You are the WORST Americans ever. Well... almost... your clients are the WORST Americans ever. You are a very close second. All we want for Christmas is- Closure of Banks, End of the Fed (especially that retarded buy-back twist thing) and to get RID of Wall Street! We've endured your job blockades for 4 years now. You are losers, we learned to live without you. Funny thing about that... YOU can't live without us.  

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