Earnings – Hope Is Fading

We have long commented on the hockey-stick-like expectations of a second-half 2013 resurgence in EPS and revenue growth. This miracle waiting to happen is, sadly, increasingly unlikely. As Goldman notes, the S&P 500 bottom-up consensus EPS estimate for the remainder of 2013 has fallen 1% since the start of earnings season. Revisions have been most negative in the Materials (-4.1%) and Information Technology (-3.7%) sectors. Managements are guiding well below consensus estimates. Of the companies have provided 2Q guidance, 76% guided with a midpoint below the mean consensus estimate (versus an average of 69% over the past 28 quarters). The median firm guided 4% below consensus (versus 3% historically). However, since the start of earnings season, bottom-up consensus full-year 2013 estimates are down only 40bp; suggesting analysts and serial extrapolators alike have considerable more reality to catch up to yet – but for now, hope is fading a little with EPS, Sales, and Margins expectations for the rest of the year all being marked down.


It seems the hockey stick is starting to droop…


most notably in Materials, Tech and Industrials…


Charts: Goldman Sachs


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