Earnings Outlook is the Key Factor - Ahead of Wall Street
April 15 2014 - 10:00AM
Zacks
Tuesday, April 15,
2014
The benign inflation reading and a soft Empire State manufacturing
survey are the only notable economic reports today. But the focus
remains on the Q1 earnings season and on that front the market will
likely find today’s positive-looking Coca Cola
(KO) and Johnson & Johnson (JNJ) reports as
reassuring enough.
Both Coca Cola and Johnson & Johnson were able to come ahead of
top-line expectations, even though Coke was barely able to meet
lowered EPS expectations. Including this morning’s reports, we now
have Q1 results from 35 S&P 500 members that combined account
for 10.8% of the index’s total market capitalization. The scorecard
at this stage shows total earnings growth +3.1% on +1.4% higher
revenues, with 60% beating EPS expectations and 40% coming ahead of
top-line expectations.
Hard to draw any conclusions at this early stage, but except for
the earnings beat ratio, performance on the other three metrics is
weaker than what we have seen thus far from the same group of
companies. The modestly improved earnings beat ratio at this
admittedly earlier stage could mean that the lowered estimates have
provided an easy-to-beat hurdle rate, as we saw with the Coke
report this morning. Intel (INTC),
Yahoo (YHOO) and CSX Corp (CSX)
will report after the close today.
We saw more negative estimates revisions ahead of the start of the
Q1 earnings season than was typically the case in other recent
quarters. As with economic data, weather was likely a factor in the
greater magnitude of estimate cuts. The flip side of lowered
estimates is that it sets us up for more frequent positive
surprises this quarter.
But beat ratios have far less
informational value than forward guidance. It will be instructive
if we will see any change in the persistently negative guidance
trend of the last many quarters this time around. My sense is that
it will be very hard for the stock market to get its mojo back
unless the earnings outlook improves.
Sheraz Mian
Director of Research
CSX CORP (CSX): Free Stock Analysis Report
INTEL CORP (INTC): Free Stock Analysis Report
JOHNSON & JOHNS (JNJ): Free Stock Analysis Report
COCA COLA CO (KO): Free Stock Analysis Report
YAHOO! INC (YHOO): Free Stock Analysis Report
To read this article on Zacks.com click here.
Coca Cola (NYSE:KO)
Historical Stock Chart
From Mar 2024 to Apr 2024
Coca Cola (NYSE:KO)
Historical Stock Chart
From Apr 2023 to Apr 2024