CONSUMER COMEDOWN: As we’ve highlighted for a couple weeks now, consumer companies have turned in the notable, negative divergence in 4q13 earnings with just 30% of Consumer Staples companies besting revenue estimates.
Consumer Discretionary sits just ahead of Energy to round out the bottom third in sector level topline BEAT percentage.
Operating trends are diverging negatively as well with consumer facing companies reporting the worst momentum in operating performance with just 26% and 42% of companies registering sequential acceleration in sales and earnings growth, respectively, according to bloomberg data.
That negative divergence continues to get discounted by investors as Consumer Staples now sits as the worst performing sector YTD despite relative outperformance in slow growth/yield chase equities and the balance of the defense trio in Utilities/Healthcare sitting at the top of sector performance.
Our Best Ideas list has been burgeoning with consumer shorts YTD - some of which include WTW, CAKE, BLMN & PBPB – ping if you’d like to discuss any of those ideas in detail.
*Prices as of close 2/20/14
THE PRINT: The mini-resurgence in the import of forecasting fundamentals has been notable this earnings season as companies missing earnings continue to be sold aggressively. Of the minority of companies that have missed bottom line estimates, 71% have gone on to materially underperform (-5.1% on ave.) the market over the subsequent 3 trading days.
BEAT-MISS: No real change in trend WoW. With ~90% of SPX constituent companies having reported, the Sales Beat percentage stands 63% - well above both the 53% in 3Q13 and the 54% TTM average. At 73%, the EPS beat percentage is basically inline with the 3Q13 and TTM average of 74% and 73%, respectively.
Christian B. Drake
@HedgeyeUSA
