PUBLIC DEBT VS. CORPORATE EARNINGS
By Stephen Smith
August 22nd, 2011
We have been writing about the
European and United States debt problems for the last three months in Market
Insights. The saga of our debt ceiling crisis
has been narrowly averted at the eleventh hour, but the spectacle of political
infighting may have damaged our global credit rating. Additionally, the timing of this artificial
crisis caused higher volatility in the financial markets over the past
week.
On the upside, a renewed commitment to reducing our deficit should ultimately be perceived by the financial markets as a positive focus of congressional attention. Meaningful policy changes are needed to ensure a stable fiscal future for the United States government.
Against this backdrop, earnings releases from corporate America for the second quarter have been much better than expected. So far, 256 of the S&P 500 companies reporting second quarter earnings are besting analysts consensus projections by 4.3%!
If this pace of earnings surprises holds for all of the companies in the S&P, then second quarter earnings will be up 22.8%. Those companies with upside earnings reports are outperforming the market by 2.7% on average. Even more remarkable, third quarter and fourth quarter earnings are estimated to come in at 18% and 20% respectively. This puts fourth quarter earnings at $107 per share with a price/earnings ratio of twelve times earnings. These earnings figures average $99 per share for 2011.
|
Earnings Surprises through 7/26/11: |
Positive
Surprises: |
169/226=74.8% |
|
|
0% Surprises: |
24/266=10.6% |
|
|
Negative
Surprises: |
33/266=14.6% |
|
Sector Summary |
Reported
Total |
% Change |
|
Consumer
Discretionary |
30/79 |
1.90% |
|
Consumer
Staples |
17/41 |
11.80% |
|
Energy |
16/41 |
46.20% |
|
Financials |
42/82 |
13.40% |
|
Health Care |
26/52 |
6.80% |
|
Industrials |
35/60 |
22.10% |
|
Information
Technology |
40/74 |
28.20% |
|
Materials |
16/30 |
59.60% |
|
Telecom
Services |
2/8 |
3.70% |
|
Utilities |
3/33 |
10.70% |
We are honored by the confidence our clients have placed in us to manage their assets. We sincerely appreciate and welcome your referrals. Please contact us at 417-890-7770 or www.trustcompanyozarks.com
