For Immediate Release

Chicago, IL – September 17, 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 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 down 31.0% year-over-year
  • Third quarter expected to be down 27.5% year-over-year
  • Staples and Health Care only sectors to post positive growth in second quarter
  • Only 30.9% of companies posted earnings growth; 23.7% posted sales growth year-over-year


  • Results much stronger than feared with median surprise of 6.7%
  • Positive surprises lead disappointments by 3.4:1 margin (surprise ratio)
  • Surprise ratio above 8:1 for Health Care and above 4:1 for Tech, Staples and Discretionary
  • Margins the cause, not revenue growth
  • 71.2% of firms beat on earnings: 45.9% beat sales estimates


  • Bottom-up estimate for S&P 500 now $60.60 in 2009 versus $60.41 last week.
  • S&P 500 now expected to earn $74.90 in 2010 versus $74.74 last week
  • Top down estimates $53.84 and $67.44, respectively


  • Total estimate increases outnumber cuts by more than 5:3 for 2009
  • Upward revisions outnumber cuts by more than 4:3 for 2010
  • Revisions ratios for both years have risen consistently through earnings season
  • For 2009, Staples and Health Care lead; Utilities and Telecom lag
  • Tech and Materials also look good for both years


  • S&P 500 P/E at 16.6x based on 2009 earnings; an earnings yield of 6.02%
  • P/E of 13.45x based on 2010 earnings; an earnings yield of 7.43%
  • Earnings yields attractive relative to Treasury and corporate bond yields
  • Health Care has lowest P/Es of any sector

The Zacks Revisions Ratio: 2009

  • Revisions ratio for full S&P 500 up to 1.92, from 1.75
  • Revisions ratio up throughout earnings season
  • Seven sectors in positive territory, Tech and Staples lead
  • Utilities and Telecom continue to see estimates cut
  • The ratio of firms with rising to falling mean estimates up to 1.48 from 1.33
  • Total number of revisions (4-week total) down to 1,484 from 3,015 two weeks ago (-50.8%)
  • Increases down to 976 from 1,917 (-49.1%); cuts fall to 508 from 1,098 (-53.7%)
  • Total revisions activity near seasonal low

The revisions ratio continues to rise, but at this point the rise is being driven by more estimate cuts falling out of the system (after their 4 weeks are up) than estimate increases falling out of the system. This is different than a flood of new estimate increases entering the system. Still, the long string of improvements in the total revisions ratio for 2009 is impressive, as is the overall level of 1.92, indicating almost 2 increases for every cut.

Seven sectors are in solidly positive territory. Most impressive are the near 4:1 ratios for both Tech and Staples, numbers that are confirmed by very strong ratios of firms with rising mean estimates to those with falling mean estimates. Telecom and Utilities continue to lag, but they are relatively small sectors both in terms of total number of companies (especially Telecom) and in terms of the total net income of the index.

Some of the more impressive Tech gainers are in the semiconductor area, including Intel (INTC) and Texas Instruments (TXN) and in the capital goods area for chips, such as Applied Materials (AMAT) and Novellus (NVLS).

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Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Dirk Van Dijk
Director of Research


Zacks Investment Research