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?