This three part report from Traverse City, Michigan provides a look at how the companies in the index are doing in comparison to beginning of the quarter earnings estimates, how earnings estimates are changing on a month to month basis along with sector breakdowns.
The reported earnings along with the current estimates of the constituents of the S&P500 for the third quarter are currently on pace to a set new quarterly earnings record, as well as a new high for the trailing twelve months based on the un-weighted operating earnings of the current constituents.
There were four constituent changes since the September update:
S&P500 constituent Kraft (KFT) completed the spin off Kraft Foods Group, Inc. (KRFT) its North American grocery business and it replaced Alfa Natural Resources (ANR) in the S&P500. Kraft Foods was added to the Consumer Staples Sector and Alfa Natural Resources was moved to the S&P400. The remaining Kraft stub was renamed Mondelez International, Inc. (MDLZ) and remained in the S&P500.
S&P500 constituent Sunoco Inc. (SUN) was acquired by Energy Transfer Partners L.P. (ETP) and was replaced by S&P400 constituent PetSmart Inc. (PETM). PetSmart was added to the Consumer Discretionary Sector.
S&P500 constituent Tyco International Ltd. (TYC) spun off two of its business sections to shareholders. The first ADT Corp (ADT) was added to the S&P500 replacing Lexmark (LXK) who was moved to the S&P400. ADT was added to the Industrials Sector and headquarter in Boca Raton, Florida.
The second spin off was of the flow control business, which immediately merged with Golden Valley, Minnesota’s Pentair Inc., forming a new company called Pentair Ltd. (PNR) that is headquartered with Tyco Ltd. in Schaffhausen, Switzerland, making it one of the US tax evaders. Pentair was also added to the S&P500 replacing DeVry Inc. (DV) and was added to the Industrial Sector.
Other notable S&P500 developments
S&P500 constituent Dell Inc. (DELL) completed its acquisition of S&P400 constituent Quest Software Inc. (QSFT).
Tenet Healthcare Corp. (THC) had a 1-4 reverse split of its stock.
All reports in this article are based on un-weighted operating earnings with the exception of those companies that no longer report operating earnings. All historical numbers have been adjusted for those that no longer provide operating earnings (all major reporting sources I use also updated these historical numbers) unless otherwise noted.
Due to a late start on collecting data for September, ten companies had already reported third quarter earnings. For these ten companies I used the earnings projections I gathered on Aug 18, 2012 as beginning of the quarter estimates, and the Sept 21, 2012 data for the beginning of the quarter estimates for the remaining constituents were compared against the update completed on Oct 26, 2012, along with any later rechecks/changes after screening the data for possible errors.
Third Quarter Data
I found third quarter reported earnings for 269 of the constituents at the time of this update. Since Kraft Foods Group, Inc. (KRFT), PetSmart Inc. (PETM), ADT Corp (ADT), and Pentair Ltd. (PNR) were not constituents at the time the comparison data was gathered, they will not be used in the comparison data when then report earnings. Further the earnings estimates of the remaining stubs of recent spin-offs Mondelez International, Inc. (MDLZ) and Tyco International Ltd. (TYC) resulted in substantial reductions in the earnings estimates of these companies, and since they had not already reported earnings, they too will be omitted from this comparison data when they do report earnings. Here is how the 269 I have beginning of the quarter estimates for fared against the beginning of the quarter estimates:
There were 84 (31.23%) that missed those projections, 34 (12.64%) were in-line and 151 (56.13%) that beat the estimates I had gathered on for beginning of the quarter comparisons. Those that beat these estimates are below the historical average of the about 62% that beat estimates made closer to the earnings report date.
In comparison, according to the data I gathered at the time of these updates, there were 167 (62.08%) that beat the earnings projections at the time they reported earnings, 29 (10.78%) were in-line and 73 (27.14%) that missed those earnings projections.
Of the 84 that missed the beginning of the quarter earnings estimates, 19 (22.92%) missed by $0.01, 36 (42.86%) were by $0.03 or less and 21 (25.00%) missed by $0.10 or more. The largest dollar miss of these estimates was $1.55 by Google Inc. (GOOG). Seven (8.33%) missed the estimates by 1% or less, 26 (30.95%) missed by 10% or more, 18 (21.43%) missed by 20% or more, 10 (11.90%) missed by 40% or more, five (5.95%) missed by 100% or more, three (3.57%) missed by 200% or more and one (1.19%) missed by 1000% or more. The largest percentage miss of the beginning of the quarter earnings estimates was by Advanced Micro Devices (AMD) that missed by 1100.00%.
Of the 151 that beat the beginning of the quarter earnings estimates, 26 (17.22%) were by $0.01, 64 (42.38%) were by $0.03 or less and 47 (31.13%) were by $0.10 or more with the largest dollar beat being $0.87 by The Travelers Companies (TRV). Seven (4.64%) beat the estimates by 1% or less, 58 (38.41%) beat by 10% or more, 27 (17.88%) by 20% or more, 10 (6.62%) by 40% or more, two (1.32%) by 100% or more, two (1.32%) by 200% or more and two (1.32%) beat the estimates by 1000% or more. The largest percentage beat was by ProLogis Trust (PLD) at 4800.00%.
The 269 reported earnings gathered on Oct 26, 2012 were 2.34% higher than the projected earnings of these companies where when gathered for the beginning of the quarter comparison data.
The earnings already reported along with the current earnings estimates for those yet to report for the third quarter are currently 0.85% higher than the record quarterly earnings reported in the second quarter. These reported and estimated earnings are also currently 1.46% higher than the record trailing twelve month earnings, also set in the second quarter.
The information provided in these reports is based on the current constituents of the S&P500, including any historical comparisons unless otherwise noted. Most historical comparisons use the constituents at the time of the past data and compare it to the present constituents. As can be seen in my reports, the S&P500 changes frequently. I believe comparing unadjusted past data to the present constituents without adjusting this data for these changes wherever possible can be misleading.
Estimates and earnings for Washington Post (WPO), Viacom (VIAB), Invesco Ltd (IVZ), Leucadia National Corp. (LUK) and Berkshire Hathaway (BRK.B) as explained below and/or in “data” found at bottom of the page.
I continue to have difficulty finding earnings estimates for the Mosiac Company (MOS), AGL Resources (GAS) and ProLogis, Inc. (PLD) along with newcomer LyondellBasell Industries NV (LYB). I have experienced renewed difficulties in finding this data and/or earnings data for Washington Post (WPO) and Leucadia National Corp. (LUK).
To this point I have managed to piece most of this data together through several sources, however in any case where I find no earnings projections for these companies, I will make my own based on my research of these companies. If made, these estimates will not be used in earnings beat/miss or increase/decrease counts, instead counted as inline or unchanged in these respective tallies; however they will be used in any other data I provide. I will also note any earnings projections that I made or changes to them in the Part 1 of these articles.
In the absence of estimated earnings for the Washington Post for the third and fourth quarter I have made my own. These estimates remained unchanged and were $3.63 for the third quarter and $7.05 for the fourth quarter. I may continue to adjust these estimates as I am able to do more research into the company.
Many of these sources were used in this article.
Have a great day trading,
Disclosure: I have investments in KRFT, MLDV, LXK, DELL, AMD and PLD. I currently have no investments in ANR, SUN, ETP, PETM, TYC, ADT, PNR, DV, QSFT, THC, GOOG, TRV, WPO, VIAB, IVZ, LUK, BRK.B, MOS, GAS or LTB although I am interested in some of the US stocks. I am currently about 92% invested in stocks in my trading accounts.
Disclaimer: This article is intended to provoke thought about investment possibilities. Acting on the information provided is at your own risk. You are urged to do your own research, and where appropriate, seek professional investment advice before acting on any information contained in these articles.