Market Woes Aside, Earnings Are Looking Up
by
Aug 15th 2011 4:30PM
Updated Aug 15th 2011 4:32PM
After the stock market mania over the past week and a half, you may think Corporate America has contributed to the unrest by reporting a big downturn in profits. After all, profit is what should drive stock prices over the long term.
But that hasn't been the case. During this earnings season, a vast majority of companies -- 69% of the S&P 500 -- have reported earnings that were better than analysts were expecting. For the S&P 500 overall so far this earnings season, earnings are up an impressive 18.9% from last year's levels.
What Happened Last Week
Last week, Disney (DIS) led the charge reporting earnings of $0.78, easily outpacing the $0.72 analysts expected. But that wasn't enough to keep shares from tumbling on a weak outlook.
At Macy's (M), revenue grew 7.3% to $5.94 billion, and earnings per share of $0.55 topped the $0.49 analysts had expected. The retailer had very upbeat comments in its earnings report, showing that maybe we're writing the consumer off too quickly.
A broad look at the S&P 500 shows that, on average, companies have reported earnings that were 7.2% higher than expectations, with only telecom coming in lower than expected. Information technology and financials have shown the most surprising earnings on the upside.
|
Sector
|
Above
|
Match
|
Below
|
Total Sector Surprise
|
Reported
|
Index
|
|
Consumer Discretionary
|
77%
|
9%
|
14%
|
10%
|
64
|
79
|
|
Consumer Staples
|
69%
|
13%
|
19%
|
1.4%
|
32
|
41
|
|
Energy
|
71%
|
0%
|
29%
|
6.9%
|
41
|
41
|
|
Financials
|
67%
|
9%
|
25%
|
12.4%
|
81
|
81
|
|
Healthcare
|
73%
|
16%
|
10%
|
5%
|
49
|
52
|
|
Industrials
|
65%
|
9%
|
26%
|
3.8%
|
57
|
60
|
|
Information Technology
|
81%
|
8%
|
11%
|
12.8%
|
63
|
75
|
|
Materials
|
63%
|
7%
|
30%
|
1.2%
|
30
|
30
|
|
Telecom
|
38%
|
25%
|
38%
|
(4.6%)
|
8
|
8
|
|
Utilities
|
55%
|
12%
|
33%
|
2.6%
|
33
|
33
|
|
S&P 500
|
69%
|
9%
|
21%
|
7.2%
|
458
|
500
|
What to Watch for This Week
It's a focus on retail this week with Home Depot (HD) and Wal-Mart (WMT) highlighting the earnings reports. Analysts are expecting earnings per share of $0.82 and $1.08, respectively. With a market focused on consumer confidence and a shaky housing recovery, there will also be a lot of focus on what management sees for the third quarter.
Dell (DELL) reports earnings after the bell Tuesday, giving us a peek into the health of the PC market. Analysts are expecting earnings per share of $0.49.
We'll be providing our feedback on these earnings reports as they happen throughout the week. Until then, reading earnings reports and listening to conference calls can give you a head start on analyzing what's being reported.
Motley Fool contributor Travis Hoium owns shares of Disney. The Motley Fool owns shares of Wal-Mart. Motley Fool newsletter services have recommended buying shares of Home Depot, Disney, and Wal-Mart, as well as creating a diagonal call position in Wal-Mart.
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