When it comes to Q1 earnings expectations one thing is well known: they are low. Very low. So low in fact that as we showed earlier this week, Q1 earnings growth is now projected to be the lowest since Q3 2012, a dramatic change from EPS expectations at the start of the first quarter when it was optimism, all the way.
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The reason for this collapse, as is well-known, is that after starting off the year on a massive euphoria binge and forecasting that this will be the year when growth finally takes off (after 5 years of false starts) companies quickly realized the economic growth is just not there, and whether one blames it on the weather, or on Russia, or - the real culprit - the sad state of the US consumer and thus, the Fed, it was time to greatly lower EPS forecasts.
Sure enough, this is what EPS expectations for Q1 looked like during Q1. A disaster:
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So with the bar set so low, it is no surprise that most companies, or 65% of those reporting Q1 earnings so far, have beat EPS expectations (perhaps what is disturbing is that as much as a third have missed).
But what about revenues.
As it turns out, in their euphoria to lower EPS estimates, the sellside lemmings forgot all about revenues. This is confirmed by the chart below, showing that while EPS expectations were plunging, sales estimates were largely flat.
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Oops.
Because according to the Deutsche Bank Q1 earnings tracker, while two thirds may have beat earnings, a stunning 51%, or a majority of the reporting companies have missed Q1 revenue estimates.
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That's ok: the top-line recovery will come in the second half of 2014. Or the third. Or the fourth. One thing is certain: by the 10th half of 2014, the economy will be in "escape velocity."
Just joking - as long as the Fed is around, and as long as it is more attractive for companies to buy back their own stocks and reward their "activist" shareholders instead of planning for long-term growth, and investing in Capex instead, there will be no revenue growth. Period.