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发帖数: 778 | 1 Sam Stovall, Chief Investment Strategist: Much to the surprise of many,
operating earnings for the large-, mid- and small-cap components of the S&P
Composite 1500 came in better than expected last quarter. The S&P 500
recorded a 51% increase in year-over-year results, while the S&P MidCap 400
saw a 45% rise. But the S&P SmallCap 600 wowed everybody by recording a 134%
surge in year-over-year results. This quarter, S&P is forecasting operating
results for the S&P 500, MidCap 400 and SmallCap 600 to advance 31%, 33%,
and 103%, respectively, as the emergence from both economic and fundamental
recession continues, albeit at a slowing rate of pace. EPS growth should
remain strong in Q4, with the S&P posting an EPS increase of 27%, while the
MidCap 400 should rise 33% and the SmallCap 600 should gain 80%. EPS growth
estimates for 2011 are expected to moderate as the 500, 400 and 600 are
projected to record EPS increases of 14%, 23% and 32%, respectively.
Above-market increases in Q3 EPS are expected to be seen in three of the 10
sectors of the S&P 1500, specifically Financials, which should record an
advance of 207%, while Energy and Info. Tech. should see gains of slightly
more than 40% each. No sector is projected to post year-over-year earnings
declines. In fact, that hasn't happened since the first quarter of this year
when Telecom Services recorded a three percent decline in year-over-year
results. Yet the S&P 1500 Consumer Staples, Health Care and Utilities
sectors, classically referred to as defensive groups since the demand for
their products and services is fairly static, are expected to post increases
of between 2% and 8%. Consumer Discretionary, Materials and Telecom
Services should record increases in the 'teens, while Industrials is
expected to report near-market results.
What are expected to be the drivers for this quarter's earnings? The
following are thumb-nail sketches by S&P's sector group heads of the likely
influencing factors in Q3 results.
Consumer Discretionary - For the Consumer Discretionary (Cyclical) group, we
expect the driving factors for Q3 earnings season to include: a continued
recovery in advertising (boosted by potentially record spending on the mid-
term elections); increased top-line growth on relatively easy comparisons (
except for Autos, which is lapping the clunkers program); operating leverage
benefits on recent restructuring actions; growing emphasis on newer
distribution technologies, such as cloud-based applications, iPad, 3D, and
VOD, and channels, like streaming, kiosks, etc; as well as some EPS support
from newly instituted share buyback programs on generally healthier balance
sheets.
Possible offsets to these positives include high unemployment and housing
market concerns, which could adversely affect spending in a variety of
discretionary areas; increased broadcast programming cost pressures from a
new fall TV season; lingering promotional pricing pressures on stiff pay TV
competition; increased commodity prices and rising input costs (for auto
makers and parts suppliers); some potential downside risk to international
earnings, due to recent currency volatility; and possible EPS dilution from
some recent acquisitions. - Tuna Amobi, CFA, CPA
In the retail space, sales continue to be challenged by a weak consumer, but
many of our companies have been gaining share from weaker competitors. With
economic data largely coming in weaker than expected for the June-September
quarter, we expect the majority of companies to guide for a cautious
holiday season (if they haven't done so already). We expect inventories to
remain rather lean. Generally, retailers are cycling up against strong year
ago results and with weak topline growth expected and gains from supply
chain efficiencies largely realized, we see modest margin gains at best.
With cash and balance sheets improved, share repurchases should boost EPS.
Finally, we maintain a negative fundamental outlook for homebuilders, as the
second half of 2010 is likely to be weaker than the first. Recent
government data point to a rise in housing starts for apartment buildings,
but not for single family homes. For Q3 EPS, we see the following: 1) weaker
sequential quarterly results in gross and net orders, lower contract
backlogs and lower homebuilding revenues. 2) flat gross margins compared
with Q2, with pricing pressure on new home sales. 3) strong cash liquidity
and improved balance sheets with lower interest costs. - Marie Driscoll, CFA
Consumer Staples - We expect only low single-digit growth in operating
earnings from the Consumer Staples sector in 2010's third quarter, as
results are constrained by cautious consumer spending and some increases in
commodity costs. However, since we think various manufacturers had locked in
a portion of their input costs, we do not expect recent rises in commodity
prices to be fully reflected in third quarter results. Also, we think
Consumer Staples companies have generally been facing a rather price-
sensitive environment, with overall revenue gains more dependent on unit
volume increases than they were in recent years.
On the positive side, however, the recent weakening of the dollar compared
to some foreign currencies is likely to bolster overseas results from
related foreign markets. Also, we expect companies will continue to focus on
cost reduction efforts, which should help to at least partly offset margin
pressure from higher input costs and spending related to promotional
activity or advertising. Also, we expect that the overall Consumer Staples
sector will continue to provide an above-average dividend yield, and also
that various sector companies will be repurchasing some of their own shares.
- Thomas Graves, CFA
Energy - Year-over-year operating EPS in Q3 should be aided by modestly
higher prices for crude oil and natural gas (up 12%-14%), which, combined
with higher production and improved refining margins, should yield EPS
growth in the 30% to 40% range for integrated oils and majors. The
independent upstream E&Ps should see EPS up about 12%, again mainly on
higher prices. The pure-play refiners should see a turnaround, going to
positive EPS versus losses one year ago.
Pipelines should benefit from higher volumes and we see EPS up nearly 10%
versus a year ago. U.S. land drillers should benefit from an increase in
unconventional gas and oil plays. As a result, we project a strong
turnaround with profits instead of losses in the year-ago quarter. Also, the
strong growth in U.S. land activity is filtering down to the oil services
players, which should see EPS gains in the 20% to 30% range year over year.
The only major signs of weakness will likely come from the offshore drillers
, where EPS should be considerably weaker, in part due to the U.S. Gulf
drilling moratorium (which was felt throughout Q3 '10) and a year-long
weakening of global dayrates and rig utilization, mainly on an influx of new
rigs that has increased competition. - Stewart Glickman, CFA
Financials - Generally speaking, the two areas of focus across the sector
will be credit quality and top line growth. For Q3, expect to see marked
improvements in bank credit quality, resulting in further reserve releases.
We expect very low single-digits annualized loan growth over Q2, driven by
improvements in commercial lending. For very large financial conglomerates,
fee income will also be a driver, and we expect lower trading and
underwriting results than in Q2, partly offset by very strong mortgage
banking due to the current refinancing boom.
In the insurance space, key factors will include top line growth and the
writing of new business. The property-casualty industry is awash in excess
capacity, and the downward pressure on insurance rates is being exacerbated
by a weak economy. Also, many insurers' underwriting margins had benefited
from reserve releases that may be winding down, removing another positive
earnings driver. On the balance sheet side, we expect an improvement in
credit quality to help most insurers. For life insurers, the weak economy
has also dampened demand for savings and investment products and for
employment-dependent offerings. We expect improved credit trends to help
offset this and buoy many insurers' balance sheets. - Catherine Seifert
Health Care - Looking ahead to Q3 results, we see low- to mid-single digit
growth, with a neutral foreign currency exchange impact. We believe European
austerity measures will continue to have a small impact on pharmaceutical
and biotech sales, but believe price increases elsewhere, particularly in
the United States, will offset the impact in Europe. We also see continued
soft physician-office visits adversely affecting healthcare service
providers, but positively impacting health insurers, where we see another
solid quarter. Overall, we see continued cost cutting and constrained R&D
spending, which should aid earnings.
September 23rd also marks the six-month anniversary of the passage of Health
Care reform. Several key provisions will now go into effect. Among these
include the elimination of lifetime caps on benefits, insurance companies
will no longer be able to deny coverage to children with pre-existing
conditions, and those under 26 can remain on their parents' policies. With
mid-term elections around the corner, numerous Republicans have threatened
to repeal the law or withhold funding for the implementation of the law.
However, we believe accomplishing either will be extremely challenging for
the Republicans unless they win large majorities in both the House and
Senate. - Jeffrey Loo
Industrials - We project the group will post solid year-over-year gains in
revenues, and EPS growth will likely exceed that of revenues. In general, we
think that the sector will be boosted by stronger global economies, along
with wider margins related to higher operating leverage and cost-reduction
programs of the past few years.
In the revenue area, we think that geographic footprints will have a
tremendous impact, as we expect Industrials companies to report much
stronger results in emerging markets, especially China, India and Latin
America. We also believe that the revenue growth that we forecast will be
driven by both higher end-user demand and some inventory restocking (among
customers of manufacturers and suppliers).
On an individual sub-industry basis, we expect the most favorable results to
be experienced in the Transportation area, particularly in flight-related
industries. We are particularly positive about the outlook for Air Freight&
Logistics companies, as air cargo shipments increased by 26% on a year-over-
year basis in the first half of 2010, following a 13.5% decline in 2009. The
largest part of that growth was being generated in emerging markets. We
also see the Airlines industry being aided by tight capacity (as carriers
have aggressively reduced capacity), and a pick-up in premium and business
travel (which are both higher-margined). In addition, we expect increased
demand for Commercial Aerospace supplies and services, on the increased
level of flight hours being seen.
Finally, we expect mixed but generally improved results in Construction and
Agricultural Machinery markets, with geographic footprints once again being
the primary factor in the level of operating strength. In Construction
Machinery, we see very strong business gains in emerging markets, where
construction growth continues, particularly for infrastructure. However, we
expect ongoing sluggishness in domestic markets, where housing trends remain
soft (although likely in a bottoming process) and conditions remain
challenging in non-residential construction. We also expect sales and EPS
growth amongst Agricultural Equipment manufacturers, on some recovery in
farming markets, particularly for milk and animal products. - Michael Jaffe
Information Technology - We foresee third-quarter EPS for companies in the
Technology Sector to be relatively healthy, reflecting a largely stable
global demand environment and mostly favorable annual comparisons, as S&P
1500 Info Tech sector posted 1% EPS growth in the year-earlier quarter. The
July to September period tends to be the weakest of the four quarters for
technology companies, and we see greater seasonality this year given
pronounced economic uncertainty and market volatility during that time,
coupled with the late Labor Day holiday.
However, we expect multinationals to benefit from the near 10% appreciation
in the euro against the dollar since the end of the second quarter, and note
that 56% of the S&P 500 Technology Sector's 2009 sales were generated
overseas. Moreover, many companies provided third-quarter guidance when the
euro bottomed in July.
A prevalent theme for the sector over the last month or two has been related
to concerns about the weakened computer end-market. A number of Asian
manufacturers reported sequential monthly declines in the summer, and
primary computer chip-makers Intel (INTC 19****) and Advanced Micro Devices
(AMD 6***) preannounced. While this area seems to have stabilized somewhat,
we are now growing increasingly concerned about the communications-equipment
end-market.
Nonetheless, we expect semiconductor, semiconductor equipment, and
electronic manufacturing services (EMS) companies to show significant yearly
EPS gains, reflecting cyclical improvements and perhaps peaking
fundamentals. Conversely, we foresee continuing weakness from home
entertainment software companies, in the absence of console refreshes and
multiple new hit titles.
More important that third-quarter results, in our view, is fourth-quarter
guidance, which we think could be healthier than some expect, based on
recovering IT spending, currency benefits, and the potential for enterprise
"budget flushes." However, we note that comparisons will be as difficult as
they've been for some time. - Scott Kessler
Materials - The major metals and mining sub-industries should see solid EPS
gains across the board on a year-over-year basis, but the sequential
comparisons (which are likely to be negative) may weigh on the stocks, if
the sequential change is worse than expected. A couple of steel names
preannounced to the downside. On the other hand, gold and copper companies
are likely to surprise to the upside in Q3 on both a year-over-year, and
possibly a quarter-over-quarter, basis. Chemicals sub-industries look
positive on a year-over-year basis, as a result of higher production,
operating rates, and margins benefiting from higher selling prices and more
stable feedstock costs. The U.S. economic recovery, combined with the growth
in emerging markets, is spurring demand. For the pulp&paper industries,
price hikes enacted during the last 12 months should boost year-over-year
comparisons, along with cost reductions. Demand for lumber may be weakening,
however. - Stewart Glickman, CFA
Telecommunications Services - Within S&P's integrated telecom services
coverage, we see quarterly growth in the broadband customer base, helped by
service bundles and students returning to college campuses counterbalancing
the ongoing loss of voice customers. Coupled with cost savings from recent
merger activities and improvements in the business market, we see modest
earnings growth for the major carriers. Within wireless, we see the
continued adoption of smartphones and tablets supporting strong data usage.
In our view, this will help top line growth of the tower providers as well
as the traditional wireless carriers, some of whom are segments of the
integrated telecom carriers such asAT&T. We see the pre-paid market
remaining competitive, but certain carriers, such as MetroPCS should gain
market share with its differentiated offerings. - Todd Rosenbluth
Utilities - S&P expects that electric utility earnings in Q3, which is the
most important quarter of the year, will improve from their depressed level
a year earlier, reflecting an increase in power demand, driven by the
abnormally hot weather, and rate increases. However, for some utilities,
these positives could be partially offset by higher operating and interest
costs. For gas and multi-utilities companies S&P covers, the warm summer
weather and slight improvements to per customer usage should have a positive
effect as well as increased oil and gas prices, supporting high single-
digit earnings growth. - Todd Rosenbluth
A Summary of Factors
So there you have it. Q3 earnings are projected to remain strong, aided by
still easy year-over-year comparisons, improved operating leverage, share
buyback programs, and the recent weakening in the U.S. dollar. What's more,
domestic economic sluggishness is expected to be more than offset by solid
growth in emerging markets. Finally, revenues are projected to continue
improving, as consensus estimates compiled by S&P's Capital IQ indicate that
the average company in the S&P 500 should report a 15% increase in year-
over-year revenues, up from the 11% recorded last quarter. The average
company in the S&P 500 Energy and Financials sectors are forecast see
revenue growth that significantly exceeds that for the overall market, while
the Health Care, Industrials, Information Technology, Materials and
Utilities groups will likely record revenue increases in the range of 11% to
17%. Only the Consumer Discretionary, Consumer Staples, and Telecom
Services groups should see near-5% improvements in revenues. | u*****n
发帖数: 778 | 2 summary
Energy and Financials sectors are forecast see revenue growth that
significantly exceeds that for the overall market
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