Key Points:

  • Second quarter earnings season shaping up as a very strong one. So far 34.4% of firms reporting. Surprise ratio 4.50 with a 7.14% median surprise. Total net income grows 40.8%.
  • Sales Surprise ratio at 2.22, median surprise 1.27%; 59.3% of all firms do better-than-expected on top line.
  • Total revenue growth 7.38%.
  • Total net income for the majority that have yet to report is expected to be 23.8% above second quarter of 2009 levels. Significant slowdown from the 58.9% growth those same firms had in the first quarter. A further slowdown to 18.2% growth expected in the third quarter.
  • Total revenue growth for those yet to report expected to be 8.9%, down from the 15.2% the same firms reported in the first quarter. Still, a very healthy level of revenue growth. Revenue growth expected to fall to 8.0% in the third quarter, still a healthy level.
  • Total earnings for the S&P 500 expected to jump 34.0% in 2010, 19.2% further in 2011.
  • Autos, Finance, Basic Materials and Energy expected to be earnings growth leaders in 2010. Construction expected to move from the red to the black. No sector expected to see earnings decline in 2010.
  • Total revenues for the S&P 500 expected to rise 4.2% in 2010, 6.5% in 2011.
  • Given 12.1% (historical) revenue growth in first quarter, and 8.4% and 6.2% expectations for second quarter and third quarters (weighted average of reported and yet to report), this implies a slowdown in the fourth quarter (or increases in full-year estimates).
  • Huge net margin expansion expected to continue in 2010 and 2011.
  • Revisions ratio for full S&P 500 at 1.08 for 2010, at 0.85 for 2011, both Neutral readings, but substantial improvement from last week. Ratio of firms with rising to falling mean estimates at 0.92 for 2010, 0.63 for 2011.
  • S&P 500 firms earned a total of $547.4 billion in 2009; expected to earn $733.5 billion in 2010, $874.7 billion in 2011.
  • S&P 500 earned $57.87 in 2009, $77.57 in 2010 and $92.68 in 2011 expected bottom up. Puts P/Es at 18.9x for 2009, 14.1x for 2010, and 11.8x for 2011.
  • Top Down estimates:  $80.32 for 2010, $90.95 for 2011.

2nd Quarter Shaping Up

The second quarter earnings season is shaping up to be a very strong one. We define the second quarter as any fiscal period ending in May, June or July, so there are a total of 172 (34.4%) of the S&P 500 firms that have already reported. The median surprise so far is 7.14% and there have been 132 positive surprises and only 24 disappointments (surprise ratio of 5.50) as far as EPS is concerned.

As for growth, the total net income of those 172 firms is 40.8% higher than it was a year ago. For those firms, that represents acceleration from the 37.1% growth they posted in the first quarter. As far as the top line is concerned, the story is pretty similar. Positive surprises lead disappointments by 102 to 46, or a surprise ratio of 2.22 and a median surprise of 1.27%. Total revenue is 7.38% higher, down from the 8.32% growth those same firms saw in the first quarter.

However, there seems to be an asymmetrical response in the market. Firms are not being rewarded if they post a positive surprise, but are punished severely if they disappoint, particularly if they disappoint on the top line.

Growth to Continue, but Slow 

Still, the focus has to be on the majority of firms that have yet to report and the expectations for them. There seems to be a real difference between those that have gone up to bat and those that are still waiting in the on-deck circle. For the 328 S&P 500 firms that are still to come, the total net income is expected to rise 23.8% from a year ago. That is pretty solid growth, but it is a far cry from the growth posted by those that have already reported. It also represents a big slowdown from the 58.9% growth in the first quarter.

The first quarter was, in turn, a big slowdown from the 120% growth in the fourth quarter. However the slowdown in growth really says much more about what was happening a year ago than what is happening now. Quite simply, there has probably never been as easy a comparison as the fourth quarter of 2008, and corporate earnings were not exactly shooting the lights out in the first quarter of 2009.

Looking ahead to the third quarter, the comparisons continue to get tougher, and growth is expected to drop to 18.2% among those that have not reported yet, and to 17.0% for those that have already reported. For an economic recovery that seems to be very sluggish and lethargic, that is still very impressive. With 9.5% unemployment and very sluggish growth in median real wages, there are lots of reasons for the average American to complain. But for the business community to complain, they show themselves to be nothing but a bunch of spoiled crybabies.

As for the top line, second-quarter growth is expected to be 8.85% among those that have not yet reported — a sharp slowdown from the 15.16% registered in the first quarter (among the yet-to-report set). A further slowdown to 7.95% growth is forecast for the third quarter.

It should be noted that the revenue estimates, particularly for the quarters, is “thinner” than it is for earnings. Still, when you think about it, 8.85% revenue growth for the S&P 500 is a very healthy level. The 500 firms account for a very large percentage of economic activity in the country, and it is rather doubtful that nominal GDP will grow anything like 8.9% in the second quarter, especially with inflation all but non-existent.

Fall in Growth, Disappointments or Upward Revisions to Come?

The strong revenue growth numbers for the quarters are a bit at odds with the revenue growth forecasts for the full year, which are looking for growth of just 4.24% for all of 2010, and 6.50% in 2011. Either we are going to have a very big fall off in revenue growth in the fourth quarter, or there are going to be a lot of revenue disappointments in the second and third quarters. Another possibility is that the full year revenue growth estimates will rise significantly from here.

There is less of a discrepancy between the quarterly earnings forecasts and the annual outlook. For the full year, earnings are expected to grow 34.0% in 2010, with further growth of 19.2% in 2011.

It is important to note that when we say “2009″ in this report, we mean the last full fiscal year to be reported, even if that year happens to end in June 2010. June is one of the largest non-December fiscal year-end months.  Thus, as those firms “switch over,” not only the projections for 2010 can change, but so too can the “historical 2009″ results.

Regardless of some of the technical timing issues, it means that earnings will have fully recovered by mid-2011, and that full-year 2011 earnings will be 8.2% above full-year 2007 earnings (before the Great Recession started). That is years before we are likely to see a full recovery in the job market. Collectively, the 500 firms in the S&P 500 earned $547.4 billion in “2009,” and that is going to grow to $733.5 billion this year and $874.7 billion in 2011.  Translated into “EPS” for the index, earnings are expected to rise from $57.87 in 2009 to $77.57 in 2010 and $92.68 in 2011.

Stocks Remain Cheap

In other words then, the S&P 500 is selling for 18.9x 2009 earnings, but just 14.1x 2010 and 11.8x 2011 earnings. By historical standards that is quite cheap. Normally, when interest rates and inflation are low, P/E ratios are higher than average. Well we currently have some of the lowest rates of inflation in decades and interest rates are at near record lows. It only costs the government 3.00% to borrow for 10 years. It is not hard to find good, solid blue-chip companies that are providing dividend yields of more than that, and not just a bunch of electric utilities either. Based on this year’s earnings, the earnings yield is 7.09%, and based on next year it is 8.47%.

Despite rapidly growing earnings, record low interest rates and very reasonable P/E ratios, surveys of investor sentiment are showing almost as much bearishness as back in the fall of 2008. The time to buy is when others are despondently selling, and the time to sell is when others are greedily buying. This is particularly true when the actual fundamentals are solid and when the market is simply depressed.

There is nothing more fundamental than earnings (OK, perhaps the balance sheets, but those look better than they have in decades as well, with about $1.8 trillion in cash sitting on them) and earnings look pretty good, or at least the expectations for them do. Over the next few weeks we will see if those expectations are rational or not.

Revisions Headed Back Up

The key to the bear case based on the earnings data is that the revisions ratios dropped very sharply during the period between earnings seasons. But now that the pace of revisions activity is picking up in response to earnings, so are the revisions ratios, but so far not to anything comparable to what we saw in the first quarter earnings season. The revisions ratios now stand at 1.08 for 2010 and 0.85 for 2011.

There is a “mechanical” reason for the 2010 estimates to increase in response to a second quarter positive earnings surprise. If the full-year estimates do not at least reflect the amount of the surprise, implicitly the analysts are cutting their estimates for the third and fourth quarters. There is no such “mechanical” effect for 2011 estimates. If we do not soon see a big increase in the revisions ratios as the pace of estimate revisions activity picks up, it would be “the dog that didn’t bark.” This extremely strong earnings season in terms of surprises should be leading to a very high revisions ratio, especially for 2010, but normally that has been true for the next fiscal year as well.

In mid-May, at the heart of the first quarter earnings season, the revisions ratios stood at 2.62 for 2010, and at 2.49 for 2011. In other words, for the S&P 500 as a whole we were seeing about five estimate increases for every estimate cut. By two weeks ago those ratios had fallen to 0.73 for 2010 and 0.71 for 2011, or about four estimate cuts for every three estimate increases. The revisions ratios are based on the four-week moving totals for estimate increases and cuts.

The total number of estimate changes, either up or down though is extremely seasonal, peaking four times a year, and falling into a deep valley four times a year, depending where we are in terms of the earnings season. The mid-May revisions ratio was based on a total of 5,293 estimate changes (3,832 increases and 1,461 cuts).

The revisions ratios at the lows of two weeks ago were based on just 1,526 estimate changes (632 increases and 894 cuts). Thus, the big decline in the revisions ratios during the inter-reporting season was more due to old increases rolling off than about a flood of new estimate cuts being made. This week marked the start of the increasing total estimate change cycle. Within a month or so, we will be back up around 5,000 total estimate changes.

In just the last week the number of estimate changes in the system increased by 29.1%. However, in response to the better-than-expected earnings, the number of estimate increases for 2010 increased by 49.8%, while the number of cuts increased by just 12.3%. For 2010, there were 1,426 estimate increases over the last four weeks and 1,319 cuts. For 2011, though, there were 1,182 increases and 1,398 cuts. Thus at least for 2011, the kennel is quiet.

Scorecard & Earnings Surprise

  • With more than one third of reports in, it looks like we are having a very strong earnings season. A total of 172 or 24.4% of S&P 500 firms have reported. The surprise ratio is 5.50 with a 7.14% median surprise. Total net income is 40.8% higher than last year.
  • Seven sectors have yet to record a disappointment this season.
  • Ratio of positive-to-negative growth reports 4.2:1. Positive earnings growth in 80.2% of all firms reporting.
  • Historically, a “normal earnings season” will have a surprise ratio of about 3:1 and a median surprise of about 3.0%. Thus this is a very positive earnings season. This is a big enough sample that it would be highly unusual for things to turn around and have the remaining firms turn around an on balance disappoint.

Scorecard & Earnings Surprise
Income Surprises Yr/Yr
Growth 		%
Reported 		Surprise
Median 		EPS
Surp
Pos 		EPS
Surp
Neg 		#
Grow
Pos 		#
Grow
Neg
Construction 64.29% 18.18% 1102.44 2 0 2 0
Industrial Products 93.31% 35.00% 16.24 6 0 6 1
Consumer Discretionary 33.26% 35.29% 14.75 10 1 11 1
Finance 75.60% 45.45% 13.33 24 8 23 11
Transportation 73.23% 55.56% 10.31 4 0 5 0
Auto 959.13% 50.00% 9.86 2 1 3 0
Computer and Tech 62.05% 38.89% 8.97 21 3 27 1
Conglomerates 7.77% 66.67% 8.38 6 0 5 1
Basic Materials 43.96% 34.78% 8.15 7 0 7 1
Utilities 2.52% 6.98% 7.02 3 0 1 2
Oils and Energy 22.87% 15.00% 6.26 5 1 4 2
Consumer Staples 10.54% 37.84% 3.50 11 1 12 2
Business Service 23.35% 26.32% 3.23 5 0 4 1
Medical 5.49% 40.43% 2.21 15 2 15 4
Aerospace -0.23% 30.00% 1.14 2 1 1 2
Retail/Wholesale 13.68% 36.36% 1.11 9 6 12 4
S&P 40.83% 34.40% 7.14 132 24 138 33

Sales Surprises

  • Sales Surprise ratio at 2.22, median surprise 1.27%, 59.3% of all firms do better than expected on top line.
  • More firms report growing than shrinking revenues, ratio 3.50:1; 77.3% of all firms report higher revenues than a year ago.
  • Revenue growth healthy at 7.38% but still greatly lags earnings growth pointing to net margin expansion.
  • Industrials, Transports and Business Service have perfect records of no sales disappointments so far.

Sales Surprises
Sales Surprises Yr/Yr
Growth 		%
Reported 		Surprise
Median 		Sales
Surp
Pos 		Sales
Surp
Neg 		#
Grow
Pos 		#
Grow
Neg
Auto 26.35% 50.00% 4.80 2 1 3 0
Industrial Products 30.05% 35.00% 4.21 7 0 7 0
Computer and Tech 26.53% 38.89% 3.17 21 7 26 2
Conglomerates 1.97% 66.67% 2.77 5 1 5 1
Consumer Discretionary 8.54% 35.29% 2.20 9 3 10 2
Transportation 17.05% 55.56% 2.15 5 0 5 0
Business Service 12.34% 26.32% 1.53 5 0 4 0
Retail/Wholesale 9.65% 36.36% 0.67 14 2 15 1
Aerospace 9.12% 30.00% 0.46 2 1 3 0
Medical 5.72% 40.43% 0.44 11 8 15 4
Basic Materials 16.96% 34.78% 0.37 5 3 7 1
Finance -8.31% 45.45% 0.28 6 6 18 17
Consumer Staples 10.21% 37.84% -0.09 6 7 8 6
Utilities 0.39% 6.98% -0.11 1 2 2 1
Construction 4.12% 18.18% -1.14 1 1 1 1
Oils and Energy 17.40% 15.00% -1.93 2 4 4 2
S&P 7.38% 34.40% 1.27 102 46 133 38

Reported Quarterly Growth: Total Net Income

The first table shows the actual reported growth of those that have already reported, and the second table shows the expected growth for the vast majority of firms that have yet to report.

  • The total net income of firms that have reported so far is 40.8% above what they reported in the second quarter of 2009. These same firms reported year-over-year growth of 37.1% in the first quarter.
  • Six sectors posting growth of more than 50% so far. Only Aerospace has a lower net income this year than last.
  • Reporting firms expected to show growth slowing to 17.0% in the third quarter (tougher comp).
  • The numbers in the table (and Revenue growth table) below only refer to those firms which have already reported. Refer back to the % reporting in the scorecard to assess the significance of the sector growth numbers. 

Quarterly Growth: Total Net Income Reported
Income Growth Sequential Q3/Q2 E Sequential Q2/Q1 A Year over Year
2Q 10 A 		Year over Year
3Q 10 E 		Year over Year
1Q 09 A
Auto -57.86% 33.43% – to + 3.73% 231.64%
Industrial Products -8.37% 65.15% 93.31% 30.66% 92.27%
Finance -20.96% 0.71% 75.60% 28.06% 37.48%
Transportation -7.79% 35.80% 73.23% 42.31% 44.17%
Construction -16.86% 538.89% 64.29% 38.57% 700.00%
Computer and Tech -1.41% 16.82% 62.05% 37.73% 69.91%
Basic Materials -20.56% -26.45% 43.96% 7.58% 158.75%
Consumer Discretionary 43.36% 28.19% 33.26% 0.68% 13.84%
Business Service -5.54% 19.64% 23.35% 26.16% 20.82%
Oils and Energy 4.98% 18.46% 22.87% 26.22% 4.32%
Retail/Wholesale 8.09% -14.99% 13.68% 8.72% 22.24%
Consumer Staples 2.96% 21.64% 10.54% 6.70% 18.71%
Conglomerates -8.39% 32.13% 7.77% -0.42% -0.20%
Medical -2.61% 0.01% 5.49% -0.18% 6.07%
Utilities -5.31% 2.70% 2.52% 0.97% -0.81%
Aerospace 3.16% -0.45% -0.23% 6.55% -8.11%
S&P -7.52% 9.49% 40.83% 16.99% 37.13%

Expected Quarterly Growth: Total Net Income

  • Total net income for the majority that have yet to report is expected to be 23.8% above second quarter of 2009 levels.
  • Significant slowdown from the 58.9% growth those same firms had in the first quarter. A further slowdown to 18.2% growth expected in the third quarter. Comparisons get tougher as we move forward.
  • Autos and Construction expected swing from the red into the black. Materials, Energy and Transport expected to post growth of over 50%.
  • Four sectors now expected to earn less than they did a year ago, nine sectors to see double-digit gains (including moving from negative to positive).

Quarterly Growth: Total Net Income Expected
Income Growth Sequential Q3/Q2 E Sequential Q2/Q1 E Year over Year
2Q 10 E 		Year over Year
3Q 10 E 		Year over Year
1Q 10 A
Construction 3.96% 62.85% – to + – to + – to +
Auto 18.79% 0.43% – to + 38.53% – to +
Basic Materials -11.44% 14.88% 161.42% 48.26% 195.14%
Oils and Energy -2.31% 6.97% 95.13% 43.16% 77.24%
Transportation 2.59% 72.76% 62.82% 57.62% 41.53%
Computer and Tech 10.28% -9.86% 44.14% 25.03% 64.57%
Industrial Products 0.05% 7.94% 24.10% 34.57% 32.07%
Business Service 8.35% 0.74% 15.95% 13.91% 12.77%
Medical 2.12% -7.99% 15.55% 11.42% 23.68%
Retail/Wholesale -10.27% 11.40% 7.18% 9.94% 17.92%
Utilities 51.70% -21.18% 1.32% 4.39% 2.42%
Consumer Discretionary 15.80% -20.88% 0.13% 3.07% 32.10%
Consumer Staples 7.89% -1.97% -2.39% -2.77% 35.04%
Aerospace -2.96% 20.52% -2.86% 194.31% -5.49%
Finance 4.01% -9.82% -4.73% -0.84% 1010.46%
Conglomerates 6.25% -23.76% -56.11% -49.01% 981.58%
S&P 4.70% -2.99% 23.84% 18.15% 58.85%

Quarterly Growth: Total Revenues Reported

The first table shows the growth actually reported, and the second table shows the expectations for the majority of firms that have yet to report.

  • S&P 500 reported Revenues up 7.38% year over year in 2Q, down from over 8.29% revenue increase the same firms showed in the 1Q. This is a healthy level of revenue growth.
  • Eight sectors seeing double digit revenue growth so far, led by Industrials, Tech and Autos, all over 25% growth. Only Financials show negative revenue growth, and Financial revenue tends to be flaky.

Quarterly Growth: Total Revenues Reported
Sales Growth Sequential Q3/Q2 E Sequential Q2/Q1 A Year over Year
2Q 10 A 		Year over Year
3Q 10 E 		Year over Year
1Q 09 A
Industrial Products 1.42% 21.46% 30.05% 28.58% 2.38%
Computer and Tech 13.07% 9.99% 26.53% 21.49% 21.71%
Auto -12.66% 9.10% 26.35% -5.33% 26.70%
Oils and Energy 9.98% 9.26% 17.40% 18.09% 3.54%
Transportation 5.25% 5.90% 17.05% 12.59% 8.54%
Basic Materials -1.46% -0.83% 16.96% 8.89% 20.50%
Business Service 6.89% 3.36% 12.34% 11.13% 9.88%
Consumer Staples -7.20% 16.18% 10.21% -10.27% 10.77%
Retail/Wholesale 13.81% -5.93% 9.65% 7.49% 10.46%
Aerospace 1.91% 4.25% 9.12% 11.81% -4.78%
Consumer Discretionary 11.76% 6.45% 8.54% 5.69% 8.00%
Medical 3.81% 1.49% 5.72% 4.93% 7.03%
Construction -14.74% 38.24% 4.12% 8.79% -0.23%
Conglomerates 6.68% 6.05% 1.97% 2.90% -0.51%
Utilities 0.43% -0.07% 0.39% -0.08% 0.22%
Finance -4.56% -10.66% -8.31% -9.81% 3.36%
S&P -1.73% 1.58% 7.38% 2.91% 8.29%

Quarterly Growth: Total Revenues Expected

The table shows the growth expected for the second and third quarters for those firms that have not yet reported.

  • Total revenue growth for those yet to report expected to be 8.9%, down from the 15.2% the same firms reported in the first quarter. Still, a very healthy level of revenue growth.
  • Revenue growth expected to decelerate to 8.0% in the third quarter.
  • Double-digit revenue growth expected for seven sectors, led by Energy and Materials (tied to the rise in commodity prices). Finance, Conglomerates and Aerospace are only sectors expected to see lower revenues than a year ago.

Quarterly Growth: Total Revenues Expected
Sales Growth Sequential Q3/Q2 E Sequential Q2/Q1 E Year over Year
2Q 10 E 		Year over Year
3Q 10 E 		Year over Year
1Q 10 A
Oils and Energy 1.89% 5.95% 29.27% 19.70% 37.73%
Transportation -1.89% 12.56% 25.68% 18.61% 18.01%
Basic Materials -3.06% 5.88% 18.21% 15.07% 19.62%
Auto 8.15% 6.89% 17.03% 27.53% 13.33%
Computer and Tech 5.17% -0.43% 15.39% 14.37% 17.46%
Industrial Products -4.67% 6.24% 12.02% 8.53% 5.66%
Medical 2.17% 0.35% 11.90% 14.15% 14.44%
Utilities -3.65% -11.19% 7.74% -5.22% 2.42%
Construction 0.76% 10.88% 6.86% 4.52% -5.23%
Consumer Staples -2.97% 2.91% 5.37% 7.25% 10.10%
Business Service 4.99% 1.79% 4.23% 9.34% 3.58%
Consumer Discretionary 3.86% -1.76% 4.12% 10.00% 5.18%
Retail/Wholesale -1.42% 3.41% 3.43% 4.01% 4.73%
Aerospace 6.70% 6.38% -0.34% 9.94% -1.99%
Conglomerates 5.56% -0.39% -3.91% 3.45% 9.16%
Finance 2.38% -31.10% -20.94% -18.97% 31.06%
S&P 1.53% -1.21% 8.85% 7.95% 15.16%

Annual Total Net Income Growth

  • Total S&P 500 Net Income in 2009 was 1.53% above 2008 levels, following a 34.24% plunge in 2008. We follow the convention where we are calling the last full fiscal year to be reported “2009″ and the next full year to be reported “2010.” Thus when some firms finish their fiscal years and report, it can “change history,” which appears to be the case this week.
  • Total earnings for the S&P 500 expected to jump 34.0% in 2010, 19.2% further in 2011.
  • Earnings recovery to happen by mid-2011, full-year 2011 earnings to be 8.2% above 2007 levels. In other words, the recovery in earnings will occur far before the recovery in jobs as we are unlikely to return to 2007 job levels until late 2013 at the earliest.
  • Autos, Finance, Basic Materials and Energy expected to be earnings growth leaders in 2010. Construction expected to move from the red to the black. No sector expected to see earnings decline in 2010.
  • Construction, Energy, Materials and Autos expected to be 2011 growth leaders with over 30% growth.
  • Despite strong growth in both 2010 and 2011, Energy earnings in 2011 expected to be 28.4% below 2008 levels.

Annual Total Net Income Growth
EPS Growth 2008 2009 2010 2011
Construction + to – – to – – to + 124.14%
Auto + to – – to + 1380.82% 33.43%
Finance + to – – to + 295.19% 24.89%
Basic Materials -4.43% -50.17% 49.40% 33.43%
Transportation 1.20% -30.04% 35.11% 21.24%
Computer and Tech 15.17% -4.20% 34.24% 21.20%
Industrial Products 5.39% -36.71% 27.24% 24.02%
Aerospace 13.20% -14.87% 17.20% 9.22%
Oils and Energy 20.87% -56.55% 16.48% 41.55%
Consumer Discretionary 8.56% -10.95% 15.65% 14.06%
Retail/Wholesale 1.43% 2.62% 13.73% 11.34%
Consumer Staples -11.64% 6.33% 12.50% 10.97%
Business Service 24.80% 1.07% 11.05% 16.53%
Medical 9.32% 1.87% 5.76% 7.73%
Utilities -1.15% -13.62% 0.94% 7.35%
Conglomerates -10.96% -23.88% 0.55% 13.09%
S&P -34.24% 1.53% 34.01% 19.24%

Annual Total Revenue Growth

  • Total S&P 500 Revenue in 2009 6.74% below 2008 levels.
  • Total revenues for the S&P 500 expected to rise 4.24% in 2010, 6.50% in 2011.
  • Given 12.1% (history) revenue growth in first quarter, and 8.4% and 6.2% expectations for second quarter and third quarters (weighted average of reported and yet to report), it is implied a slowdown in the fourth quarter (or increases in full-year estimates).
  • However, quarterly revenue estimates are thinner (fewer estimates in the consensus) than annual ones.
  • Energy to lead 2010 revenue race, Tech and Materials to take silver and bronze, but Transports and Industrials have a chance to make it on to the medal stand.
  • Looking out to 2011, Energy and Autos are the only sectors expected to see double-digit revenue growth, although four other sectors expected to have revenue growth over 8%.

Annual Total Revenue Growth
Sales Growth 2009 2010 2011
Oils and Energy -34.47% 21.21% 15.27%
Computer and Tech -6.22% 16.36% 8.45%
Basic Materials -19.30% 12.34% 7.49%
Transportation -13.65% 12.24% 8.24%
Industrial Products -19.55% 11.75% 9.15%
Medical 6.16% 9.18% 3.27%
Business Service -2.35% 5.72% 6.13%
Consumer Discretionary -8.72% 5.05% 5.51%
Retail/Wholesale 1.25% 4.87% 5.19%
Utilities -5.87% 4.82% 2.65%
Auto -21.36% 2.03% 10.67%
Aerospace 6.30% 1.23% 5.89%
Conglomerates -13.19% 1.07% 1.70%
Construction -15.92% 0.72% 9.25%
Consumer Staples -1.59% -2.85% 4.25%
Finance 21.18% -20.42% 2.84%
S&P -6.74% 4.24% 6.50%

Revisions: Earnings

The Zacks Revisions Ratio: 2010

  • Revisions ratio for full S&P 500 at 1.08, up from 0.81 last week, still in neutral territory.
  • Tech leads among large sectors. Transports and Autos strong, but small sample size.
  • Eleven sectors seeing more cuts than increases.
  • Ratio of firms with rising to falling mean estimates at 0.92 up from 0.67 last week, a neutral reading now.
  • Total number of revisions (4 week total) up to 2,745 from 2,127 (29.1%).
  • Increases up to 1,426 from 952 (49.8%), cuts up to 1,319 from 1,175 (12.3%).
  • Total Revisions activity past seasonal low, we will see an explosion in estimate activity in next few weeks.

The Zacks Revisions Ratio: 2010
Sector %Ch
Curr Fiscal Yr
Est – 4 wks 		#
Firms
Up 		#
Firms
Down 		#
Ests
Up 		#
Ests
Down 		Revisions
Ratio 		Firms
up/down
Auto 1.16 5 1 24 4 6.00 5.00
Transportation 2.56 7 1 59 11 5.36 7.00
Computer and Tech 1.53 33 23 288 115 2.50 1.43
Conglomerates 0.87 6 2 19 8 2.38 3.00
Industrial Products 0.72 14 6 53 24 2.21 2.33
Consumer Discretionary 1.20 18 12 94 56 1.68 1.50
Consumer Staples 0.06 17 14 74 57 1.30 1.21
Medical 0.56 18 28 114 118 0.97 0.64
Oils and Energy -0.16 12 26 175 183 0.96 0.46
Aerospace 1.00 4 5 17 18 0.94 0.80
Construction -2.16 3 6 15 17 0.88 0.50
Utilities -0.23 21 19 58 68 0.85 1.11
Retail/Wholesale -0.61 14 26 116 141 0.82 0.54
Basic Materials -1.52 10 11 43 54 0.80 0.91
Finance 0.69 29 44 243 388 0.63 0.66
Business Service -0.43 7 12 34 57 0.60 0.58
S&P 0.37 218 236 1426 1319 1.08 0.92

Revisions: Earnings

The Zacks Revisions Ratio: 2011

  • Revisions ratio for full S&P 500 at 0.85 up from 0.74 — in neutral territory.
  • Transportation and Autos have highest revisions ratios, small totals.
  • Tech still strongest of major sectors.
  • Six sectors with positive revisions ratios, ten with ratios below 1.0.
  • Ratio of firms with rising estimates to falling mean estimates at 0.63 up from 0.52 — still a bearish reading.
  • Ten sectors have more firms with falling mean estimates than rising estimates.
  • Total number of revisions (4 week total) at 2,580, up from 1,910 (35.1%).
  • Increases up to 1,182 from 813 (45.4%) cuts rise to 1,398 from 1,097 (27.4%).

The Zacks Revisions Ratio: 2011
Sector %Ch
Next Fiscal Yr Est – 4 wks 		#
Firms Up 		#
Firms Down 		#
Ests Up 		#
Ests Down 		Revisions
Ratio 		Firms up/down
Transportation 1.66 6 2 51 8 6.38 3.00
Auto 0.27 5 1 20 4 5.00 5.00
Computer and Tech 0.95