Posts filed under “Earnings”

Earnings vs. Stock Returns

MarketWatch – Good news: Earnings growth is slowing
Worried that lower earnings growth will lead to a bear market? You’re not alone. Almost everyone else is concerned too. But, by following the herd, you run the distinct possibility of becoming too worried: The stock market historically has performed better when earnings growth is slower than when it is faster. That at least is the conclusion reached by a study conducted by Ned Davis Research, the quantitative research firm. After analyzing year-over-year earnings growth back to 1927, the firm found that the stock market tends to underperform whenever earnings growth is particularly strong. The reason for this counterintuitive finding, according to Ed Clissold and Dan Sanborn, U.S. market strategists for Ned Davis Research and co-authors of the study: The market senses that high earnings growth is unsustainable, and is therefore discounting an imminent “slower earnings-growth environment.”


We conducted a similar study recently, measuring stock returns during the month following earnings season.  Whether starting the study in 1992, as the top chart highlights, or 2000, as the bottom chart illustrates, the percentage of companies beating earnings estimates has little-to-no effect on subsequent stock returns.  This is in line with our theory that earnings estimates are largely a gamed statistic.  We should not expect a manipulated number to have any sort of consistent relationship to stock returns.
Click to enlarge:


Source: Bianco Research




For more information on this institutional research, please contact:

Max Konzelman

Category: Earnings, Think Tank

Earnings vs. Revenues

Click to enlarge: MarketBeat – Charts of the Day: Beware if Earnings History Repeats As if there weren’t enough warning signs flashing from earnings season, the always thoughtful John Mauldin offers a one-word assessment of the future for corporate profits: Beware. “Currently, profit margins are cyclically high, near historical highs, and already at unsustainable levels,…Read More

Category: Earnings, Think Tank

Revenue Growth: Signalling A Recession?

Category: Earnings, Economy, Video

JPM’s Conference Call: Q2 2012 Earnings Call

Category: Corporate Management, Earnings, Think Tank

7 Factors To Watch in a Slowing Economy

Just a quick comment as I am still out of sorts due to the 8 hour time difference and some Jetlag: The data continues to come in showing the global economy is slowing. The key question is whether this slowdown is to full on recession or merely a sloppy-muddle-through-barely-above-stall-speed economy. With all of the cross…Read More

Category: Earnings, Economy, Valuation

Earnings Season

Click to enlarge: MarketBeat (WSJ Blog) – Earnings Preview: Companies Getting More Pessimistic With another earnings season on the horizon and Europe’s economy struggling mightily, investors are getting that queasy feeling once again. Companies have been slashing forecasts sharply the last few weeks, with Europe’s continued turmoil often being cited as one of the main…Read More

Category: Earnings, Think Tank

Here Comes Earnings Season

Click to enlarge:   Reuters – Analysis: U.S. companies blame Europe for earnings warnings: As an increasing number of American companies warn their earnings will fall short of expectations, many are pointing the finger at Europe as the culprit.  As the second-quarter corporate results season gets underway in the next few weeks, the euro zone…Read More

Category: Earnings, Think Tank

The Occasional Yin and Yang of Research

Two reports from different wirehouses caught my eye yesterday due to their amazing Yin and Yang nature. First up, the always excellent Equity & Quant Strategist at BAML, Savita Subramanian (the Yin), issued a report titled Wall St. Proclaims the Death of Equities. The report discusses the firm’s proprietary sell-side indicator, which has reached near…Read More

Category: Analysts, Data Analysis, Earnings, Investing, Markets, Research

Quick Look at Guidance & Earnings Revisions

A few interesting charts from Merrill looking at revisions:   Click to enlarge: ˜˜˜ ˜˜˜ Source: BofA Earnings Season Update 1Q12 Earnings Wrap-up 29 May 2012

Category: Analysts, Data Analysis, Earnings

Q2 Earnings Preview … Still Not Good

Click to enlarge: Factset – Earnings Insight, May 25, 2012 Analysts Begin To Take Down Q2 Estimates; Double-Digit Growth Still Projected for Q4 During the month of April, there was little change to the estimated earnings growth rate for the second quarter. On March 31, the estimated earnings growth rate for Q2 2012 was 6.2%….Read More

Category: Earnings, Think Tank