Monday, February 2, 2015
Stocks are indicated to start this first session of the month on a modestly positive note. January was a decidedly weak month, with a combination of soft earnings data and global growth worries weighing on stocks.
On the data front, the December Personal Income and Spending read came largely in-line with estimates, while the January factory sector ISM survey comes out a little later. The factory sector survey is expected to be down modestly from last month’s 55.5 level, but remain firmly in expansionary territory.
PMI data from other parts of the world has been on the weak side, with Euro-Zone PMI barely in the positive while Chinese PMI data remaining in the negative. In fact, both the government as well as private sector measures of China’s PMI readings remained in the negative (below the 50 level), with the government survey coming under the 50 read for the first time since 2012.
With respect to Q4 earnings season, we now have results from 230 S&P 500 members that combined account for 62.4% of the index’s total market capitalization. Total earnings for these companies are up +4.2% from the same period last year, with 71.7% beating earnings estimates.
Total revenues are essentially flat from the same period last year (up only +0.1%), with 57% beating top-line estimates. The results thus far offer a mixed comparison to what we have seen from the same group of companies in other recent quarters. The beat ratios are about where they have been in other recent quarters for this same group of companies, but the growth rates are on the weak side.
Exxon’s (XOM) report this morning spotlights the drag that the oil producers have been this quarter. The oil giant came ahead of estimates, but its total earnings were almost -$1.8 billion below the year-earlier level. The Exxon report followed similar numbers from Chevron (CVX), ConocoPhillips (COP) and others.
Including this morning’s Exxon report, we now have Q4 results from 71.3% of the index’s total market capitalization. Total earnings for these Energy sector companies are down -19.9% from the same period last year on -17.2% lower revenues, with 80% beating EPS estimates and 60% beating revenue estimates.
Energy has been a drag this reporting season and the picture isn’t expected to change in the coming quarters. Total Energy sector earnings are expected to be down -58.5% in 2015 Q1 and -56.2% in Q2. These are undoubtedly tough times for players in the oil patch.
Sheraz Mian
Director of Research
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