We’ll keep the prose pithy here on this week’s earnings scorecard update:

  • BEAT-MISS: With ~80% of SPX constituent companies having reported 4Q13 results, the Sales BEAT-MISS spread remains above the 3Q and TTM averages while the EPS beat percentage has faded some of its early momo and now sits flat with 3Q13 results.
  • CONSUMER COMEDOWN:  Consumer companies have turned in a notable, negative divergence with  <40% of Consumer Staples companies besting revenue estimates and consumer discretionary taking the penultimate position in topline BEAT percentage. Further, consumer facing companies are reporting the worst momentum in operating performance with just 2/5 of companies accelerating sales or expanding margins.  Wth the XLY and XLP both in the bottom third of sector performance YTD that relative operational underperformance is seemingly being discounted.  Also, with slow growth/yield chase assets outperforming and Healthcare and Utilities leading Sector in the YTD, its notable that the third member of the canonical defensive trio (Utilities/Healthcare/Staples) has failed to participate.    
  • OPERATION “UNDERWHELM” GREENLIGHTED:  Operating performance metrics deteriorated modestly WoW and at present just 48% and 52% of companies have registered sequential acceleration in sales and earnings growth, respectively.   The percentage of companies reporting sequential operating margin expansion is even more underwhelming at just 42% .
  • HIGH BETA, LOW EXPECTATIONS? - From a style factor perspective, High Beta and Low Yield names have performed notably better vs. prevailing topline estimates than their inverses. 
  • DON’T MISS!:  EPS misses continue to be sold aggressively as 75% of EPS shortfalls have gone on to underperform the market by -5.2% on average over the subsequent 3 trading days. 

THE 2/5's (UN)COMPROMISE? - 4Q13 Earnings Scorecard - ES OP Table021414

THE 2/5's (UN)COMPROMISE? - 4Q13 Earnings Scorecard - ES Table 021414

THE 2/5's (UN)COMPROMISE? - 4Q13 Earnings Scorecard - EPS BM

THE 2/5's (UN)COMPROMISE? - 4Q13 Earnings Scorecard - Sales BM

THE 2/5's (UN)COMPROMISE? - 4Q13 Earnings Scorecard - ES SFP 021414

Christian B. Drake