For Immediate Release
Chicago, IL – July 14, 2009 – Zacks Research Equity Strategist, Dirk Van Dijk says that S&P 500 earnings are continuing to show red ink. He tracks companies on the Zacks.com web site, naming names, while forecasting trends for the months ahead.
Key Points from Van Dijk’s Latest Earnings Assessment
- Second-quarter total net income expected to be down 34.9% year over year
- Staples only sector expected to post positive growth in second quarter
- Seven sectors expected to decline more than 25%
- Financials expected to rebound after disastrous 2008
- Early positive surprises lead disappointments by 7:1 margin
- Third quarter expected to be down 22.9% year over year
- Estimate cuts for 2009 again outnumber increases slightly
- Full year 2009 expected to fall 13.6%, implies strong growth in fourth quarter
- Bottom-up estimate for S&P 500 now $59.72 in 2009 versus $59.60 last week.
- S&P 500 now expected to earn $74.24 in 2010 versus $74.09 last week
The Zacks Revisions Ratio: 2009
- Revisions ratio for full S&P 500 down to 0.96, from 1.04
- Reverses steady climb in the ratio for over 3 months
- Three sectors in positive territory: Consumer sectors and Tech lead
- Now into neutral territory for the S&P 500 as a whole
- Industrials and Utilities continue to see estimates cut
- Ratio of firms with rising to falling mean estimates falls to 0.90 from 0.94
- Total number of revisions (4-week total) up to 1,567 from 1,472 (6.5%)
- Increases down to 766 from 751 (2.0%); cuts up to 801 from 721 (11.1%)
- Total Revisions activity past the low for the quarter
Like the “green shoots” of the economy, the trend towards more estimate increases relative to cuts has begun to wilt. This is the second straight week that the revisions ratio has fallen, reversing a 14-week sting of higher revisions ratios.
Granted a reading of 0.96 is far from a disaster, especially compared to the sub 0.20 readings we were seeing 6 months ago. Furthermore, it is happening on a seasonally low period of total revisions activity. Still, the positive change was one of the real hopeful signs in the estimate data, and has started to fade.
The number will become more significant in coming weeks as earnings season prompts a flood of estimate revisions. The direction those revisions take, on balance, will have a very significant influence on the direction the market takes.
Tech and Consumer Staples continue to have the strongest estimate revisions profiles.
The staples are lead by the food stocks like General Mills (GIS), ConAgra (CAG) and J.M. Smucker (SJM). While the changes in the mean estimates are not large for these names, there is a large preponderance of estimate increases over cuts. Given the tight consensus around such names, large changes in mean estimates are rare, but large numbers of increases or cuts are still significant.
The Tech sector is lead by Chip stocks like National Semiconductor (NSM) and Broadcom (BRCM).
The weakest sector is the Industrials, most notably the railroads like Norfolk Southern (NSC) and Union Pacific (UNP).
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Contact:
Dirk Van Dijk
Director of Research
312-265-9211
Visit: www.zacks.com
