One of the knocks on last year’s earnings was that it was cost cutting was driving profitibility — not organic revenue growth. The recovery could not turn into an expansion, we were told, without solid revenue gains. Earnings may have surpassed Wall Street expectations for seven straight quarters, but sales have trailed forecasts since 2008. And there is only so far you can “cut your way to prosperity.”

Which makes the latest S&P500 sales data encouraging: “More U.S. companies are exceeding sales forecasts than any time in four years, helping extend the biggest stock-market rally since 1936.”

In Q4 2010, 71% of Standard & Poor’s 500 companies are reporting more revenue than analysts estimated. This is the largest proportion since 2006. Sales beat projections by an average 2.2% — the most in two years.

And the forecasts are even stronger. Here’s Bloomie:

“Total revenue for S&P 500 companies may rise 7.5 percent this year, the most since 2007, to an all-time high of $1,017.44 a share, according to analyst estimates compiled through Feb. 6 by Bloomberg. Sales fell 13 percent between November 2008 and October 2009 as the worst U.S. recession since the 1930s forced businesses and consumers to cut back on spending . . .Since the start of the third quarter of 2008, when Lehman Brothers Holdings Inc. filed the largest bankruptcy in U.S. history, sales for S&P 500 companies have missed estimates by an average of 0.1 percent, while earnings have surpassed forecasts by 2.9 percent, data compiled by Bloomberg show. The fourth quarter was the first time since 2008 that the average sales surprise reached 2 percent, the data show.”

One caveat: Analysts tend to extrapolate out to infinity. AT tops they are too bullish, at bottoms they are too bearish. Hence, there forecasts catching up to reality is not always cause for celebration.

Still, the actual sales is a data point that the cyclical analysts have been forecasting. The cycles seem to be still painting the broad overview more accurately than anything else . . .

>

Source:
S&P 500 Beating Estimates for Sales by Most Since 2006
Whitney Kisling and Lynn Thomasson
Bloomberg, Feb. 7 2011 
http://noir.bloomberg.com/apps/news?pid=20601109&sid=a8z.YNrvluXw&pos=11

Category: Analysts, Cycles, Data Analysis, Economy

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

14 Responses to “Surprisingly Strong Q4 2010 Revenues”

  1. baychev says:

    for an unbiased view, please back out the financial services sector and the commodity inflation that is factored in the revenues of oil giants and the like and give us the numbers, these would be the organic growth that does not depend entirely on the QE sequel. then we can judge. thanks.

  2. Well, any subset will present a biased view — the question is, what sort of bias to you want to show ?

  3. “Well, any subset will present a biased view — the question is, what sort of bias to you want to show ?”

    –BR, above.

    if, only, the “Nightly News” would run such a disclaimer…

    any chance Katie will pick it up, and run with it?

    though, forget that, limited, example, Intellectually Honesty, for it to be True, knows no bounds..

  4. Bill W says:

    I’m a biased zombie bear, so I have a bearish thought. Is it possible that revenues will be higher and profits lower going forward. This would be due to higher commodity prices and lower productivity. I’ll concede that higher revenues are good for the economy.

  5. Petey Wheatstraw says:

    BR:

    I’d like to see the non-bias of honest accounting.

    Sales/revenue are up? Where’s the money coming from that would boost these numbers?

    Legitimate organic growth? No.

    A lighter per capita debt burden? Not likely (especially if we’re “keepin’ it real” by including the individual share of the public debt).

    Middle class wage/job growth and the increased liquidity/discretionary spending that would accompany any such developments? Nope.

    The final arrival of money that has trickled down to the consumer class from the corporate oligarchy, as promised by da’ Gipper? Of course not.

    The money is debt. Not profit. That more of it is flowing to publicly traded corporations from the common pocket of the American citizenry (and not from the individual consumer out of his/her store of accumulated, unleveraged wealth, as would be the case in an expanding economy) is not an all-clear signal.

    We are still spending more than we take in. Dishonest accounting cannot make up the difference.

    Tangentially related, this might be the most insightful article I have read in some time (linked to by naked capitalism):

    http://www.truthdig.com/report/item/recognizing_the_language_of_tyranny_20110206/

  6. Dima says:

    Okay – so actuals beat forecasts – true statement.

    My question is – have the the forecasts been progressively lowered until forecasts are consistently beating the forecasts? Isn’t that the game?

    It does appear that revenues are increasing at some companies – but I would like to see that inflation adjusted numbers before I believe that “organic” revenue is that much higher. Inflation driven increases in revenues are in my ignorant opinion not “growth”.

    I would ask to see more analysis that a “beat” forecast.

    It took a child to tell everyone that the emperor had no clothes.

  7. b_thunder says:

    with all the “green shoots” BR has been writing about recently, i find it interesting that, according to his own recent interviews, his firm is *only* ~50% invested, and has ~50% in cash. With all the wonderful headlines I’d expect much higher portion be “long” equities.

  8. bigking12345 says:

    how about money laundering by drug gangs in Fl from S America and Mexico?

  9. the pearl says:

    These comments are interesting. They say more about the people making them than about Barry’s post. Some of you have some serious mental hurdles to ascend. I am astonished by the many folks who are angry and claim to have things figured out, yet spend countless number of hours repeating the same endeavor. Finding new ways to convince themselves that their views are correct.

    I can’t help if some folks time would be better spent on more productive matter.

    Barry, I believe all your efforts at educating us against our biases are failing to gain traction.

  10. PDS says:

    the bulk of the top line growth is coming from overseas…not domestic driven…as austerity gains traction overseas and tight money policies take hold in EM’s and competitive currency devaluations pick up…how long can that foreign catalyzed top line growth continue in that environment??

  11. droubal says:

    It’s great to see some positive economic reports after a long dismal period. But, I don’t see how we can have a prolonged economic recovery with so many structural problems. I don’t believe economic progress will be sustainable, until we see solutions to:
    Massive gov’t deficits.
    Unsustainable entitlements
    Still falling real estate markets.
    High unemployment.
    The continued outsourcing of jobs by industry.
    The control of the banking industry over congress.
    Third world educational results.
    Massive state and municipal deficits.

    Too many problems to expect a real recovery.

  12. Robespierre says:

    @Barry Ritholtz Says:

    “Well, any subset will present a biased view — the question is, what sort of bias to you want to show ?”

    Well you are avoiding the question. What baychev was pointing to is that it is not revenue growth but recirculated free QE money showing up on the financial books and therefore on the bankers pockets. Is not a bias of “interpretation of data” it is a bias of real substance that you are so lightly dismissing.

  13. baychev says:

    @Barry

    i want to see what is due to business accumen and what is due to the helping hand of heli ben, then i can pick winners and losers, because we can all be picking TBTFs, but that does not create jobs unfortunately and this appears to be our problem. ah, and money printing causes a whole lot of other issues that leave us worse off as well…