Show Us the Money…..90 Day Treadmill aka Earnings update..Chinese New Year

From our perch we are happily surprised at the continuation of efficiencies companies are churning out. We also feel a bit snookered as many managers were VERY conservative on their prior Q 3 2012 call (tax, fiscal cliff concerns) driving estimates somewhat lower.

A total of 343 companies out of 500 have reported thus far in our favorite monitored pool, the S&P 500. Here’s the bottom line from the horse’s mouth, Standard and Poor’s:

• 224 out of 343 or 65% beat their estimates
• 79 missed  their consensus estimate

More important facts from Standard and Poor’s:

• $23.53  S&P 500 adjusted earnings for the quarter (Q4 2012) so far (78.4% reported)
• $23.73 YEAR AGO (12-31-11)  S&P 500 adjusted earnings for the quarter

New accounting treatment for pensions is weighing down earnings a bit, but companies ARE NOW PRINTING YEAR OVER YEAR NEGATIVE GROWTH ($23.53-$23.73= NEGATIVE 20 cents.) This has us concerned, brow raised, slight perspiration, but no towel necessary….yet.

According to Factset, guidance for the next quarter has not been good, however there is a small sample size of only 80 companies, 67 of which have guided negatively. We are watching this closely as well and will give the small sample size the benefit of the doubt.

Show Me the Money….this is why we are concerned..

Earnings Estimates for the remainder of 2013 by quarter

While this chart does not look too threatening, take a closer look…the growth rates assumed are too much in our opinion. Just looking at the year-end quarter growth rates (12-31-12/12-31-13)  that is a 26% year over year expected growth rate. WE DON’T THINK SO!

For now market participants are either ignoring this or expecting this, either way, dangerous in our opinion. Time will tell, but caution is advised!

Have a Great Monday and sorry to be so heavy this early in the week!

JK

PS If it is that easy to review, why are others not doing it ?? We are glad they are not as market inefficiencies allow profit opportunities….

PSS Gong Xi Fa Cai…Happy New Year to our Chinese Friends as their country celebrates for the week (Their Capital Markets will be closed all Week)