Earnings Beat Rate Sticking at 62%

Another 682 US companies reported earnings this week, bringing the overall total reported this earnings season up to 1,903. Next Thursday marks the end of the first quarter reporting period when Wal-Mart releases their numbers. As shown below, 62% of the companies that have reported have beaten analyst earnings per share expectations. With only a handful of companies left to report, the "beat rate" is sure to hold above 60%. The fact that the "beat rate" has been able to increase as more and more companies have reported has helped the market trade higher throughout earnings season. Last quarter's "beat rate" was a bear market low of just 55.5%. As shown in the bottom chart below, this earnings season will be the first quarter over quarter increase since the third quarter of 2006. When the "beat rate" started to decline in 2007, it was definitely a warning signal for the market, and this quarter's increase is hopefully the start of a new positive trend.

Comments

[fatcat:]

If you set the earnings bar low enough,you might get a 100% beat rate....but what good is that.

This continues to be a market of lies....

May 09 07:36 AM

[SAME OLE TALE:]

Fatcat missed the real tale - - it must be Bush's doing!!


On May 09 07:36 AM fatcat wrote:

> If you set the earnings bar low enough,you might get a 100% beat
> rate....but what good is that.
>
> This continues to be a market of lies....

May 09 08:34 AM

[prudentinve...:]

Yes, earnings beat estimates, but the "estimates" were artificially low, so they were sure "to be beaten".

It is more revealing to compare earnings with their previous values of a year ago, two years ago, and so on ..... I suspect that corporate insiders looked at their own earnings in this way, and that's why insider selling is at record high levels.

May 09 11:49 AM

[E Nuff Sed:]

Good analysis and insight. Prices of shares are partly influenced by expectations in the market and the market has been beating expectations.
I think we need to confirm this by another analysis which shows the $ or % amount of out or under performance.

May 09 11:51 AM

[gordon:]

You sucker blog con-artists continue your propaganda, and I had respect for bespoke until now, you know damn well the sand-bagging estimates. You're off my bookmarks now. Here's from financialsense>

At the 1932 bear market bottom the yield was 10.50% and the P/E was just under 10. At the 1942 bear market bottom the yield was 8.71% and the P/E was 7.3. At the next great bear market bottom in 1974 the yield was 5.9% and with a P/E of 7.24. If we take this same reading at the 1982 low the yield was 6.2% and the P/E was 6.9. Presently, the yield on the S&P is at 2.62 and the P/E sits at 58.97. Yeah, I know that many of the analysts show the P/E on the S&P to be in the 20 to 21 range. That is bogus. Those numbers are based on the so-called “operating price earnings.” The P/E based on Generally Accepted Accounting Principles is 58.97 and that is the same measure as has been used throughout history. The so-called operating price earnings is a measure that became popular in the 1990’s as we moved into the George Orwellian socialist society of today. In any event, based on the real P/E as is represented by GAAP it is safe to say that the P/E and the dividend yield are nowhere near par, and as a result this data also suggests that the March low was NOT the bear market bottom.

May 09 01:00 PM

[altaman:]

Gordon you are making way too much sense. Get the hell off this board before you scare the sheep! ;)

May 09 01:18 PM

[Living4Divi...:]

PI - I agree with you 100%.

Earnings are manipulated to make them appear smooth from quarter to quarter. Earnings are easy to manipulate. Estimates are merely that, estimates, and the analyst uses estimates based on guidance given by the company. So, it is fairly easy to have earnings beat estimates, quarter after quarter.

When earnings FAIL to beat estimates it is a sign that someone really screwed up.

On May 09 11:49 AM prudentinvestor wrote:

> Yes, earnings beat estimates, but the "estimates" were artificially
> low, so they were sure "to be beaten".
>
> It is more revealing to compare earnings with their previous values
> of a year ago, two years ago, and so on ..... I suspect that corporate
> insiders looked at their own earnings in this way, and that's why
> insider selling is at record high levels.

May 09 01:39 PM

[thecadean:]

There are no investors- only traders. Earning went out the window in the late 1990. Remember,dot com numbers like ratio to sales, clicks.... this is truly a speculative, momentum market. Go long, go short, but just ride the trends. Like the once great American corporation, earning, balance sheets and stress test are all just outsourced numbers. We are rapidly replacing the US middle class with the new government class (yes, started by a republican- Bush). Over the past 9 years only the State and Federal payrolls have increased. The TSA has added over 100,000 federal jobs while food stamps and WICk programs have tripled. In April, we hired an additional 70,000 new cencus workers- any wonder why the unemployment #'s decreased. At least America has found something it good at.- Financial Engineering and Growing government.

May 09 08:18 PM

[E Nuff Sed:]

Many people form their thesis and get angry when the market does not conform to their mental models. Then they blame the government, the "sheep", the great socialist schemers etc etc. Stop and think maybe your thesis is wrong. Or if it is right the timing is wrong.

Gordon's pov is the market is still way too expensive and is enraged that it has gained nearly 40% when he was expecting it to go down to 1932 levels. Cetin's pov is that the goldilocks economy is back and we are in a "V" shaped recovery.

I think the truth is in the middle. The market is still very cheap and has still a way to go. This is because interest rates are very low and when you adjust stock prices for interest rates they at compelling valuations.

I also think the world is much too complicated and compelling that we are unlikely to see the despondency of the 70's and 80's much less the 30's.

Armageddon is off the table but after the current rally is over - good ole fashioned asset allocation and asset picking will be the only way to make money.

May 09 09:00 PM

[SeekingTruth:]

To E Nuff Sed:
You make a very well reasoned and compelling argument, however, I am convinced that at least two things are never off the table:
1. Articles of the Constitution
2. Armaggeddon (potential of) in the financial markets.

Additionally, there are a lot of very damaging scenarios that are well short of Armageddon.

There are times when being solidly well reasoned, calm, and balanced is inconsistent with reality, rare though those occasions may be, and when they do occur we would be well advised to take heed.

May 09 10:01 PM

[H. T. Love:]

On May 09 10:01 PM SeekingTruth wrote:

> To E Nuff Sed:
><snip>

> There are times when being solidly well reasoned, calm, and balanced
> is inconsistent with reality, rare though those occasions may be,
> and when they do occur we would be well advised to take heed.

I forget who said it, but this seems to apply.

If you can keep your head when all about you are losing theirs, you obviously don't understand the gravity og the situation.

:-))

HardToLove

May 10 05:22 AM