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With Earnings Season Nearly Over 60% Of Companies Have Missed On The Top Line, Revenues Down 1% From Last Year

Tyler Durden's picture




 

The second quarter earnings season is almost over with 87% of companies reporting. And so far it has been an unmitigated disaster, with only 51% of companies beating on the far easily fudgible bottom line number (which further facilitates the transition of America to a "part-time worker society" as repeatedly demonstrated here), but a stunning 60% of all S&P member missing on the top line. More importantly, for the first time since the Lehman collapse, year-over-year revenue "growth" will be negative, declining at 1% from Q2 2011. Whether the reason is due to FX exposure in a world in which the USD suddenly found a major bid in the past 3 months, or because of corporate unwillingness to reinvest their cash into their business and increase CapEx is unknown. But one thing is certain: absent central bank intervention, which for some inexplicable reason has seen the PE multiple of the S&P rise to 2012 highs, the stock market would not be where it is today if corporate fundamentals had anything to do with actual stock price.

BofA summarizes:

With the conclusion of Week 4, 2Q earnings season is drawing to a close with 405 of the S&P 500 companies (87% of earnings) having reported. Utilities dominated Week 4, with mixed results amid warmer weather but weaker commodity prices. Overall, 51% of companies have beaten on EPS, 38% have beaten on sales, and 25% have beaten on both. This low percentage of beats has stayed generally constant throughout reporting, and is on track to be the worst quarter for positive surprises since 1Q09. For companies that did not beat on EPS, the majority have been in-line, with misses concentrated at the most foreign and European exposed companies. Current bottom-up EPS of $25.66 represents YoY growth of 6%, slightly higher than our forecast of $25.50 and just 0.7% higher than  consensus expectations at the start of reporting season.

 

60% of companies have missed on the top line this quarter amid a stronger dollar, season giveback from 1Q, weak commodity prices and slowing global growth. While some of these headwinds are likely to fade, we could see even more pressure from FX and the European recession in 3Q, as well as slowing demand ahead of the US fiscal cliff. Misses have been widespread, with sales at all ten sectors coming in below expectations. 2Q sales are on track to decline 1% YoY, or come in flat ex. Financials.

First, there is where we stand, and why this week will be a very boring one.

Just 25% of companies have beaten on both EPS and sales this quarter, compared to 41% in 1Q. Telecom has seen the highest proportion of positive surprises, with 50% of companies beating on both metrics, followed by Tech and Health Care.

Revenues are set for their first quarterly and YoY decline:

The market may be broken, but at least it still has the decency to punish "missers", and reward "beaters":

Companies which beat on both EPS and sales have outperformed the S&P 500 by 4.4ppt in the five days following reporting, while those that missed on both underperformed by 3.4ppt. This performance spread has widened over the course of reporting, and compares to average outperformance of 1.4ppt and underperformance of 2.9ppt since 2Q09.

Sadly, there are fewer and fewer beaters to reward:

The three-month earnings revision ratio dropped to 0.6 in July, now well below its long-term average of 0.9.All ten sectors have seen more negative than positive revisions over the last three months, while in July only Telecom and Utilities saw more positive than negative revisions.

The three-month management guidance ratio also declined in July, but at a lesser rate. Companies are now guiding down twice as much as up, with only Staples and Financials seeing more positive than negative guidance over the last three months.

 

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Mon, 08/06/2012 - 09:26 | 2681387 GMan_
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There's nothing wrong. Everything is fixed right?

Mon, 08/06/2012 - 09:30 | 2681395 bigdumbnugly
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With Earnings Season Nearly Over 60% Of Companies Have Missed On The Top Line, Revenues Down 1% From Last Year

the other 40& are either cooking the books or in the business of manufacturing ebt cards.

Mon, 08/06/2012 - 09:33 | 2681407 GetZeeGold
GetZeeGold's picture

 

 

Sooo release the balloons......now?

 

Mon, 08/06/2012 - 09:42 | 2681426 SilverTree
SilverTree's picture

NegativeGDP bitchez!

Mon, 08/06/2012 - 10:22 | 2681555 Fukushima Sam
Fukushima Sam's picture

Crash it, bitchez.

Mon, 08/06/2012 - 09:43 | 2681429 MillionDollarBonus_
MillionDollarBonus_'s picture

This article only looks at one side of the coin. Sure, businesses may be missing earnings, but the government's revenues are at all time highs, and have remained remarkably stable. 

http://www.usgovernmentrevenue.com/revenue_chart_2010_2015USp_13s1li011mcn_10t30t40t50t60t_Total_Revenue_By_Type

This more than compensates for the poor earnings performance, but doomer libertarians are only interested in negative news, and always ignore positive statistics, like record tax revenues. 

Mon, 08/06/2012 - 10:16 | 2681540 MarkS
MarkS's picture

Nice try, but wrong...We're not quite back to 2007 and the numbers in the chart are projected for 2012-2015.  Of course, your use of 2010 as the start date for the chart wasn't purposefully malfeasant. 

And you left out that governement spending is about $1T higher per year now.

Mon, 08/06/2012 - 10:25 | 2681564 Rainman
Rainman's picture

Thanks to the Jobs Act revenue doesn't matter anymore. Make earnings what you want them to be...WINNING !

Mon, 08/06/2012 - 12:24 | 2681920 boogerbently
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If anyone saved the article from yesterday I'd appreciate you posting the link.

It was a "book review" on a book about grassroots revolution being the only way to take back our govt.

Mon, 08/06/2012 - 09:34 | 2681410 vast-dom
vast-dom's picture

clearly. markets are soaring monday. teflon ponzi.

the zombie that just couldn't be put down!

Mon, 08/06/2012 - 09:27 | 2681389 mrktwtch2
mrktwtch2's picture

the march towards 1415 spx..continues..

Mon, 08/06/2012 - 09:46 | 2681438 spastic_colon
spastic_colon's picture

its all set now.......since equities are used in almost all confidence numbers and surveys.....the next month of backward looking reports will continue to support the smoke and mirrors etc etc right into November......voila' instant re-election!

That and european equities are up, when they go down, the US markets don't pay attention anymore.

Mon, 08/06/2012 - 09:28 | 2681391 vinu02
vinu02's picture

It doesn't matter. Rally ON. Bad news is good news in this market. 

 

and fear index is at 52 week low.

 

http://www.freefdawatchlist.com/2012/08/trading-volatility-s-index-vix.html

Mon, 08/06/2012 - 09:31 | 2681400 Everybodys All ...
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The vix has been broken for months. You might want to just think of it as the next Libor scandal.

Mon, 08/06/2012 - 09:54 | 2681459 SheepDog-One
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Hmm perfect time for a nice false flag major event then.

Mon, 08/06/2012 - 09:28 | 2681392 LawsofPhysics
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Do revenues matter if you have the taxpayers at gunpoint?  Atlas continues to shrug.

Mon, 08/06/2012 - 09:50 | 2681444 Hype Alert
Hype Alert's picture

It's another reason they have to keep capital gains going in the market. 

Mon, 08/06/2012 - 09:28 | 2681393 tradewithdave
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FT's Jack "premature" on probe by Chilton.

http://tradewithdave.com/?p=11399

 

 

Mon, 08/06/2012 - 10:11 | 2681452 GetZeeGold
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Cause the FT is the first one Chilton is gonna call.....even if it does require him to stay up late.

 

 

Mon, 08/06/2012 - 09:32 | 2681397 Cognitive Dissonance
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"With Earnings Season Nearly Over 60% Of Companies Have Missed On The Top Line, Revenues Down 1% From Last Year"

That just means stocks are primed for one more run to the top to seek out the last of the greater fools.....which simply allows the so-called "smart" money to exit stage right.

Then it gets interesting...........again!

Mon, 08/06/2012 - 09:31 | 2681398 Racer
Racer's picture

Funnymentals... don't matter, it's different this time  /sarc

Mon, 08/06/2012 - 09:31 | 2681402 BandGap
Mon, 08/06/2012 - 09:33 | 2681403 deez nutz
deez nutz's picture

just "bullish-IT"

Mon, 08/06/2012 - 09:41 | 2681423 RobotTrader
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The Dow is within inches of 3-year highs.

What happens when earnings improve?

Mon, 08/06/2012 - 09:43 | 2681432 SilverTree
SilverTree's picture

People are waking up Robo, they know its all shit.

Mon, 08/06/2012 - 10:10 | 2681523 GetZeeGold
GetZeeGold's picture

 

 

Yup...and if earnings do improve, I think Ben Shalom is gonna want his QE cash back.

 

Mon, 08/06/2012 - 09:50 | 2681443 Haager
Haager's picture

When things improve then the algo-robots will leave the stock-markets, turning to the mall for a shopping-spree.

Mon, 08/06/2012 - 09:52 | 2681453 deez nutz
deez nutz's picture

What happens when earnings improve?

hyperinflation!

 

Mon, 08/06/2012 - 09:58 | 2681474 adr
adr's picture

Earnings can only improve due to the skill of the accountant manipulating the books.

If my wife could cook as well as the average CFO, I'd be quitting my job and opening a restaurant in NYC. In one month I'd be the talk of the town and rated the best restaurant in the city.

Oh, and here's a hint. Earnings aren't going to improve, and any improvement was already priced into most stocks by July 2009. Some stocks right now have over 100 years of growth priced in.

Mon, 08/06/2012 - 22:44 | 2683601 MeelionDollerBogus
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when earnings improve the financial calendar ticks over from q3 to q4 - in the year 2016.

The DOW is always within all-time-highs right before it drops 2000 to 4000 points.

Mon, 08/06/2012 - 09:41 | 2681424 MFLTucson
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Why does this matter, stocks have not traded on eranings for 3 years, its all about how much liquidity Mr. Bernanke wants to print, not earings or stocks would be at Dow 2000.

Mon, 08/06/2012 - 09:42 | 2681427 Meesohaawnee
Meesohaawnee's picture

nothing matters.. data, earnings..its all useless ,broken and a complete fraud..  You  tell me one trader whos like, "yea i gotta long here cause things are so good". well maybe robo. and todays theatre  presents another ramp job. Really if you were gutsy enough to hold long after fridays theatre, if there were really traders, wouldnt they fade the open? whatever happened to normal healthy profit taking. Computers dont take profits??  ben just tell us what you want the SPY to be? lets get this comedy over with. this is a complete embarassment to global equity markets.

Mon, 08/06/2012 - 09:53 | 2681456 khakuda
khakuda's picture

The only thing that matters is that each time the market corrects by as little as 5%, the world's central banks, led by the Fed crap in their pants and are out there printing or threatening to print even more money.

It's been clear from the get go, they are going to try and inflate stock prices as much as possible.  Their misguided goal is to get everything overvalued again to 'save the system'.  They don't spend 2 seconds thinking about what happens once they get there, other than to say no one saw it coming after the fact.

Mon, 08/06/2012 - 09:46 | 2681437 Meesohaawnee
Meesohaawnee's picture

i feel like i live in china. everything is a covered up fake fraud and lie. god have we lost our soul.. anyone want to do the over under on what ben programmed the algos? 1410? 1400?  

Mon, 08/06/2012 - 09:50 | 2681446 RobotTrader
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Anybody who loaded up on TVIX, TZA, FAZ, etc. based on all the sensational headlines reported on the various scroom-blogs......

 

My condolences.

Mon, 08/06/2012 - 22:43 | 2683596 MeelionDollerBogus
MeelionDollerBogus's picture

You won't be saying that in 2 weeks. FAZ may fail to act as it should but if it does properly behave as a -3x ETF on SPY then FAZ is likely to go up 50%

This is precisely the as-seen-before peaks that SPY, DIA hit before slamming down 20%.

So how's your facebook shares doing? http://youtu.be/4TlPo0yCSa4

This is how to spot the real peaks & dips - http://flic.kr/p/bnbsG5

Mon, 08/06/2012 - 09:52 | 2681454 Shizzmoney
Shizzmoney's picture

It doesn't matter to the politicans or to the central banks how much the people are making.  Only the corporations matter.

Mon, 08/06/2012 - 09:53 | 2681455 adr
adr's picture

with the poll of CFOs saying that 30% of earnings are fudged at corporations, to prop up stock prices. Of course none of the polled CFOs say they cheat, but they understand why others would.

So really nobody beat, and real earnings are at least 30% lower. In fact I would wager that the real books are showing massive losses. You can't increase gross revenue in a decling sales environment, it is impossible for any company.

Even missing earnings and seeing the stock drop like a rock for a day, ended up with a week long rise back up. In the case of Apple the stock is higher than the pre-earnings release. Nike is almost back above as well. Look at fucking Amazon, what the fucking hell. Missed earnings might have an effect for a day, but the market does't dwell on the past, it is always focused on that amazing profit generating future.

Not that it matters, The stock market is a poorly programmed video game that fails to register the proper input from the player. You hit the X button to shoot, and you jump instead. Hitting left makes you run right. One of your idiot freinds claims he can play the game, all you have to do is remember the game does the opposite of what you want it to do. You tell your friend he is an idiot and throw the game in the garbage, pissed of that you wasted $50. At least you aren't going to cause yourself endless agrevation, just to try and get some value out of playing the game.

Mon, 08/06/2012 - 09:55 | 2681461 Meesohaawnee
Meesohaawnee's picture

your so funny robo.. always get a good laugh .. i need one less cup of coffee reading your post. what would we do without your humor? god bless ya

Mon, 08/06/2012 - 09:57 | 2681468 RobotTrader
Mon, 08/06/2012 - 10:03 | 2681488 vertexa
vertexa's picture

BREAKING: Iran’s Currency in Free Fall! US to Attack Iran Missiles, Israel to Take Out Syria & Hezbollah!

Iran currency on a freefall: rial down 4% now trading at 1US$ = 21,300.

Cbank, to officially devalue rial min 30%, allows market to dive.

Mon, 08/06/2012 - 10:43 | 2681617 Zen Bernanke
Zen Bernanke's picture

Ah yes, this article clearly explains the strength in ES.  

Mon, 08/06/2012 - 11:41 | 2681813 hannah
hannah's picture

'corporate fundamentals' havent had a thing to do with the s&p since march 2009....neither has tech analysis. if you want to know what the market will do, just ask the fed......

Mon, 08/06/2012 - 12:41 | 2681967 Apocalicious
Apocalicious's picture

Thankfully, healthcare costs continue to skyrocket, otherwise revenue numbers would have been even worse...

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