With 20% Of S&P Reporting, YoY Ex-Fin Revenue Growth Is... Negative

Tyler Durden's picture

So much for a pick up in Q4 revenues. With 20% of the S&P companies reporting, revenues ex-Fins (a vertical yield curve will do miracles for bank revenues - will this continue for ever? and what happens if and when the curve flattens...) are actually down 0.57% compared to the prior year. Expectations for future revenues ex-Fins jump to the 10% ballpark YoY for the next 3 quarters. Without a new stimulus, where will the money to push these revenues come from?

Here is Rosenberg's take on the earnings season to date.

So far, nearly 80% of companies that have reported have beat expectations, which is significantly above the long-run average of 60%. On average, companies have beat analyst expectations by about 21% (long-term average is 2%).

While earnings have been strong, revenue results have lagged. On this basis, the blended rate is 5% year-over-year, which is lower than last week’s rate of 7%. Once Financials are stripped out, revenue growth is sitting at the grand total of 0% -- down a percentage point from a week ago even as bottom-lines improved. The question going forward is how much more companies can cut costs – at some point sales need to increase in order to increase earnings (have a look at “The Great Corporate Pullback” on page B2 of today’s WSJ). We have likely reached that point, and investors can sense it.

In terms of sectors, Financials, Materials and Consumer Discretionary have the highest earnings growth (although Howard Silverblatt at the S&P cautions that the Financials sector is fraught with pro-forma, restatements and membership changes). Energy and Industrials have the lowest growth rates (-24% and -13%, respectively). On the revenue side, outside of the Financials sector huge 73% increase (which is actually 10ppt lower than last week), Health Care is the top sector with +9% expected revenue.

EPS have indeed trended as expected (as can be seen below), yet how many more mass layoffs can occur in order to keep trimming both corporate fat and muscle? Real unemployment already is at multi-decade highs. How much more EPS benefit can accrue to companies at the expense of individual taxes not going into the Treasury?

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TheGoodDoctor's picture

Well Sam's Club just layed off 11,200 so they will probably make some "profits".

/sarcasm off

Gold...Bitches's picture

You mean Walmart laid off 11,200 Sams Club employees

TheGoodDoctor's picture

Right. I just figured that the IQ here is quite high. ;)

Gold...Bitches's picture

It cant be!  They told me it was ok to go shopping!

TheGoodDoctor's picture

PS How much are tax revenues down for 2009? What percent is due to lack of employment taxes?

PAPA ROACH's picture

The Enron economy is alive and well!!!

BigBagHolder's picture

C'mon... thats what a nominal GDP recession looks like, right?  Top line GDP is off ~6%.  The S&P500 cannot "grow revenues" if the overall economy is smaller.  Duh!

This year looks like a 4-10% nominal GDP gain... and that will grow profits (with costs lagging) ~20%.

If I remember correctly profits were off about 30% YoY last year in q4, q1, q2.  So that's two years of 25% growth to get back to highs.  Prob a good rough estimate of what happens.

Anonymous's picture

I think you have it backwards. GDP gain does not drive revenue gain. Revenue gain drives GDP gain. GDP is nothing more than consolidated revenue. The only way we get to 4%-10% is with massive government printing because, as Tyler pointed out, it ain't coming from organic corporate growth. I don't know where you live, but where I live (Texas) we are supposedly better off than most and yet state sales tax revenues are down 17.9% YoY and it's just starting to dawn on the masses that we've got a long way to go. People here (and many other places) are hunkering down and riding the storm out. My question is, how do you get to 4%-10% GDP growth without the consumer? Don't tell me the government. With everything they printed last year, they got us to zero, and printing is going to cost a lot more now. No disrespect intended. I just don't see where your point has anything to do with reality on the ground, although I will admit that it would be convincing in a college lecture hall.

Anonymous's picture

although i tend to agree with your
comment on some level
gdp is a synthetic number which includes
much more than corporate revenues...

corp revenue and gdp need not correlate

Anonymous's picture

and I guess Leo is buying ?
alongwith Mr. Doll of BlackRock !! (meanwhile Stuyvesant Stew Stinks)

IE's picture

Financials aren't even truly profitable WITH the assistance of the yield curve - they're just benefitting from wild west accounting (aka outright lying).  Yippie ki-yay, mofos!

Racer's picture

Lower the bar to make it easier to jump, and what about 'actual' valuations based on p/e? Or price to book?

No of course not, only got to 'beat estimates'

What a con game!



Cursive's picture

Yeah, but if Laksman Atchuthan were here, they'd tell us to focus on the future.  We're going to miss TONS of capital appreciation by not buying this rally.  Things will pick up and then we'll see, only when it is too late, that we should have been buying equities hand over fist.  Think of J.P. Morgan, circa 1907.  Such are the fairy tales that bulltards weave.

BigBagHolder's picture

Where's the lower bar?  Where's the lack of focus on PEs?

GS just lowed comp, beat eps by 60%, >$8/shr... PE is ~7x trailing, 8x estimates.

Fear of event risk, govt reg risk is very very high.  Which is why returns will probably stay good.  Large caps are 10-15x earnings, 6-12x cashflow, in a 3% int rate env.

The best large caps (MSFT, HPQ, INTC, AAPL, PG, PFE, etc) never had a losing Q... what's that worth?

H.W. Plainview's picture

But Beeker just told his guest that the USA is rock'n and roll'n because of the 13% Rev growth so far for all reporting S&P's this quarter...

Anonymous's picture

How could Jerry Speyer of Tiscman- Speyer be bankrupt? How could he have lost tens of billions? He went to Columbia Collegium for morons and idiots. For 70k/year they teach you the bestest financial technicums and strategiums. I like US@A universitaniums. The produce very smart bizness peoples. Only special Columbia collegiumidiot can learn to lose 20 billion $.

Anonymous's picture

"How could Jerry Speyer of Tiscman- Speyer be bankrupt"
No,he is not an idiot,and I don't think he is bankrupt either. You see,this is the beauty of bankruptcy law,and I guess it is what they teach you in those colleginuidiot. Once you have a name,yu can borrow billions,and pay yourself millions,and whether you succeed or fail,you get to keep your millions,and stuff the billions to your lenders. Who are by the way,most probably some retirement funds,which are run by people who went to the same colleges,and where told to follow the name,and forget the game. They are ordered to stay fully invested in stocks even if the market is crashing(so I heave read),just so that somebody else can transfer as much as they want from the retirees to their accounts. They probably are also ordered,in the bond case,to take whatever Moody sp or Fitch throws at them as a bible,so the likes of Tichman and others can wheel and deels untill their properties becomes worthless. Is't beautiful?If I can finance a million revenue with a billion dollar deal,make me a sallary of couple of millions a year,and leave it to fate and not cashflaw analysis,wouldn't I take it?.

Anonymous's picture

one other point to keep in mind is that a lot of the earnings improvements reflect overseas earnings results...thus the implication of these results to the usa economy is imprecise or perhaps misleading....

Anonymous's picture

This is not a new phenomenon. If it weren't for armies of financial engineers monkeying with millions of manual spreadsheets we would just shut down overnight. We make manually manipulated spreadsheets in the USA, get it?