In a week dominated by first very negative news out of Europe and then market-moving “announcements” out of Draghi, the ECB and other European officials, the little matter of earnings got pushed to the side a bit.
Of course if you are a shareholder, you were either very happily surprised or bitterly disappointed this week, European headlines aside.
There was AAPL’s big “triple miss”, failing to beat the very high-end estimates, the “whisper number” and the consensus number, although we do believe AAPL beat their own low-ball forecasts. We have a feeling this is going to be pretty quickly forgotten as new products roll out in the Fall and holiday season.
There was also the interesting market reaction to AMZN, which again told the market, “don’t worry about our making money, we are investing for the future” and the market agreed for now. It is notable that their investment in geographical product distribution centers was roundly applauded after a knee-jerk quick move down right after a “weak” earnings report.
And then there was Facebook (FB), which took it on the chin again after a conference call many were calling “outright weird”.
But there were many, many other big names which reported this week, with some huge winners and notable losers…far too many to recap here.
But we do want to give another quick look as we did last week on the earnings season to date.
According to StreetAccount:
“It was another very busy week on the earnings calendar with 173 S&P 500 companies reporting. The EPS beat rate fell to 59% from 77% last week. While the season-to-date EPS rate for Q2 fell to 71% from 76%, it is still largely in line with the 72% four-quarter trailing average. The revenue beat rate fell to 40% this week from 45% last week. This pushed the season-to-date revenue beat rate down to 42% from 47%. Note that the revenue beat rate for Q2 continues to run meaningfully below the 63% four-quarter trailing average.”
So basically the same story as last week (although overall weaker numbers), with the overall theme being a decent EPS beat rate off lowered expectations but a quite notable shortfall in revenues. The estimated EPS growth rate year over year for the 2nd Qtr. now stands at +3.3% and revenue growth rate at +1.0%, both well below estimates from earlier in the year.
StreetAccount had one other comment we thought fairly obvious but important nonetheless, “the post-earnings price action also seemed to be skewed by the macro sentiment on the reporting day given the extent to which the Eurozone sovereign debt crisis returned to the frontburner as the key directional driver for the broader market.”
This certainly raises the question of “luck of the draw” for certain companies such as AMZN, which might not have been treated so favorably on an ugly market down day.
With 292 of 500 companies in the S&P having reported so far, there is still plenty of excitement to go in the season and we will be back next week with a further update.
Good Trading!
David W. (aka The Underground Trader)
David W’s Option Income Generator. service is designed to help tame market volatility by producing monthly income via a proprietary buy-write strategy. Check it out today!
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