One of the “constant” declarations of the current earnings season? Of those reporting, roughly 3/4 of corporations exceeded profit-per-share estimates.
On the other hand, it’s not uncommon for 2/3 to 3/4 of companies to beat lowered expectations;¬†key executives help to create “beatable” numbers. In addition,¬†each of¬†8¬†major economic sectors¬†typically have corporations that, historically speaking, raise the earnings-per-share guidance for their stocks.
For instance, according to the folks at Bespoke Research, technology corporations historically raise future earnings guidance by 14.3%. Consumer staples companies? 7.3%. And energy companies tend to guide earnings estimates higher by a less remarkable 3.1%.
This time around, though,¬†companies are ratcheting down their own expectations. Technology, Healthcare, Energy, Financials and Materials all raised guidance for the future quarter, but by a smaller¬†percentage than¬†respective historical norms.
The 3 sectors that raised guidance by more than a historical average? The consumer discretionary, consumer staples and industrials segments.
Perhaps ironically, tech stocks smashed through estimates and currently enjoy a sentiment that they’re driving the economy forward.¬†Yet¬†executives in tech were more cautious than¬†in prior quarters. Meanwhile, the most prominent “misses” came from industrial stalwarts like 3M and Caterpillar. Still,¬†industrial sector stocks raised guidance by more than¬†historical percentage norms.
Unofficially, we completed 3 weeks of earnings season on 7/29/11. Here is how 8 of the major sectors performed in the 7/11-7/29 period:
|Sector ETFs: 3-Week Earnings Season Performance||¬†|
|¬†||¬†||¬†||¬†||¬†||¬†||7/11-7/29 Approx %|
|Energy Select Sector SPDR (XLE)||¬†||¬†||-0.6%|
|Technology Select Sector SPDR (XLK)||¬†||¬†||-2.5%|
|Consumer Staples Select SPDR (XLP)||¬†||¬†||-2.9%|
|Health Care Select Sector SPDR (XLV)||¬†||¬†||-3.3%|
|Consumer Discretion Select SPDR (XLY)||¬†||¬†||-4.2%|
|Financials Select Sector SPDR (XLF)||¬†||¬†||-4.3%|
|Materials Select Sector SPDR (XLB)||¬†||¬†||-5.5%|
|Industrials Select Sector SPDR (XLI)||¬†||¬†||-8.3%|
|S&P 500 SPDR Trust (SPY)||¬†||¬†||¬†||-3.8%|
There may be several reasons why future guidance didn’t have a noticeably favorable impact this earnings season. For one thing, the debt ceiling drama took center stage; discretionary stocks and industrial stocks may have been dumped¬†for their ties to the economic cycle¬†during the theatrical production. Similarly, detrimental economic data cast a dark shadow over cyclicals throughout the latter half of July, from a sickly real estate market to anemic¬†manufacturing activity.
In turn, the cautious guidance by tech and energy didn’t seem to drag¬†on share prices. The¬†perception of tech share strength in both earnings and IPOs may be creating greater demand, while oil prices have been buoying¬†energy stocks.
Disclosure Statement: ETF Expert¬†is a web log (‚ÄĚblog‚ÄĚ) that makes the world of ETFs easier to understand. Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships. You may review additional ETF Expert disclosure details here.