Earnings Trends: Positive and Negative Surprises

Here is an interesting chart displaying the earnings trend of S&P 500 companies.

Column 1 represents 10 basic sectors.
Column 2 represents Q1 median growth year-over-year.
Column 3 represents Q2 median projected growth year-over-year.
Column 4 represents 2006 median growth.
Column 5 represents 2007 median projected growth.
Column 6 represents the % of the companies, that have reported earnings in Q2.
Column 7 represents the median % surprize factor.
Column 8 represents the number of positive surprise.
Column 9 represents the number of negative surprise.
Column 10 represents the number of match as expected by analysts/experts.

Among S&P 500 companies, 60% of them have already reported earnings. Positive surprizes turned out be 4 times that of negative surprises. There were 201 positive surprises and 53 negative surprises. All in all, most of the sectors had positive surprises than negative surprises, except for Utilities and Telecom sector. The median S&P500 company is expected to post double digit year-over-year earnings growth for the 19th straight quarter. While the 10.51% growth is still lower than previous quarters, it is much better than expected. The Q2 median growth is projected at 9.49%.

Health Care sector seems to be the best among the lot so far this quarter, posting 15.4% year-over-year growth with 26 positive surprises against only 4 negative surprises. Materials sector is looking to be the second best with 14.6% year-over-year growth with 16 positive surprises against only 3 negative surprises. Industrial sector and Utilities sector are also expected to post double digit growth, though only 28% in the Utilities sector has reported earnings. Tech sector and Telecom sector had a disappointing run this quarter. Tech sector is expected to post only 1.35% year-over-year growth, even though the positive surprise to negative surprise ratio was 3:1. Telecom sector is actually showing negative growth, but with only two reports in, it is to early to draw any conclusions about that sector.

It is worth noting that the results so far have been much stronger for the S&P 500 (large-caps) than the S&P 400 (mid-caps) and the S&P 600 (small-caps). Large caps have been much more active in shrinking their share bases through stock buybacks than have their little brothers, and they also tend to have more foreign exposure and thus benefit from the very weak dollar.

(Source: Zack.com)