Another Great Earnings Season

Dirk van Dijk The Pragmatic Capitalist October 26, 2010

By Dirk Van Dijk at Zacks Investment Research

Key Points:

Due to a broken wrist, I have had to type this report mostly one-handed. Thus, this week I am dispensing with my normal commentary and you will have to make due with the bullet points and tables. I would point out that this has been a great reporting season so far, especially on the bottom line. The top line also looks good especially if one excludes the financials.

However, soaring net margins have been the primary driver of the earnings growth. Analysts have responded to the better-than-expected results by raising their estimates, but much more so for 2010 than for 2011. The lack of upward revisions for 2011 might be a yellow flag.

Scorecard & Earnings Surprise

Historically, a "normal earnings season" will have a surprise ratio of about 3:1 and a median surprise of about 3.0%. Thus, this is a very positive earnings season, or will be if the numbers hold up as more firms report. While the jury is still out, it seems like this is going to be another better-than-expected earnings season.

Sales Surprises

Reported Quarterly Growth: Total Net Income

The first table shows the actual reported growth of those that have already reported, and the second table showing the expected growth for the firms that have yet to report. The reported numbers are based on a very small sample size and do not reflect what the overall S&P 500 is likely to report. See comment in the Earnings Scorecard section.

Expected Quarterly Growth: Total Net Income

Quarterly Growth: Total Revenues Reported

This table shows the growth of the 159 firms that have actually reported.

Quarterly Growth: Total Revenues Expected

Quarterly Net Margins Reported

Quarterly Net Margins Expected

Annual Total Net Income Growth

Annual Total Revenue Growth

Annual Net Margins

Revisions: Earnings The Zacks Revisions Ratio: 2010

Revisions: Earnings The Zacks Revisions Ratio: 2011

Total Income and Share

P/E Ratios

Data in this report, unless stated otherwise, is through the close on Thursday 10/21/2010.

We use the convention of referring to the next full fiscal year to be completed as 2010, not all firms are on December fiscal years, this can cause discontinuities in the data, particularly around this time of year. The data is based on FY1, not based on 2010, even though I may call it 2010 in the report. All numbers, including historical ones, reflect the current composition of the S&P 500, thus some historical numbers may differ from those reported by S&P which are based on the composition of the index at the time of the reports.

Dirk van Dijk, CFA is the Chief Equity Strategist for Zacks.com. With more than 25 years investment experience he has become a popular commentator appearing in the Wall Street Journal and on CNBC. Dirk is also the Editor in charge of the market beating Zacks Strategic Investor service.

More about Zacks Strategic Investor >>

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