Earnings trend | stockbee

9/05/2007

Earnings trend

The last earning season is over and as per Zacks data we had 20 th quarter of double digit growth. Now the market will start turning its attention to next earnings season trends and analyst expectations.

With the second quarter over, it is time to turn our attention to what the third quarter is going to look like. (Even though the actual quarter is two-thirds over, we are about six weeks shy of when the results really pour in). If taken at face value, the expectations are for median earnings growth to slow to high single-digits in the third quarter. However, we have been down this road before, in just about every quarter it looks like we will have a big slowdown before the results come in, and in every quarter the voice of Gomer Pile kicks in with "Surprise, Surprise, Surprise". At the same point in each of the last six quarters, earnings for the up coming quarter were supposed to slow significantly, and into the single digits in five of them. The actual range of expected median year-over-year growth has been exceptionally narrow. The worst expected growth was for the first quarter of this year at 8.33% (the actual was 10.0%) and the best was 10.1% for the fourth quarter of 2006 (actual was 12.9%). Given that history, it is hard to get overly concerned about the median expected growth rate for the third quarter being down at 8.7%, even if that is sharply lower than the 13.5% growth we enjoyed in the second quarter.

8 comments:

youngamerican said...

Now that last earnings season is over I was wondering if you could post a few examples of your earnings driven system for this past quarters results. I noticed in the past you posted many charts showing the earnings effect and was hoping you could post a few for last quarter.

thanks

syl20 said...

Hi Pradeed,
It's good to have you back ! Hope you've enjoyed your vacations.

During this earning season, I have been watching and tracking earning surprises posted on the WSJ (over 100% surprise with low analyst coverage (1 or 2))to see how and if the stocks would react and, most of the time the stock would not go up even if the surprise was nice. I know that this is not automatic but would like to know if WSJ is a reliable source for earning surprises and earnings.

It seems that there is some discrepencies on the earning results depending on the source of the information (Reuters, WSJ, MarketWatch.com, Briefing.com, etc.) so I am wondering if:

1-There is a more reliable source of information for earning surprise ?
and
2- if the fact that the stocks I tracked from WSJ did not react positively because of the market conditions we had in august ?

Thanks again for your time and advise.

freebird said...

syl20, I found that the WSJ earnings digest had a bit of a lag to it, seemed to be about 2-3 days. That in conjunction with the nature of the market over the last two months might be a factor.

I used briefing.com's earnings calendar for what seemed to me to be timely, consistent info and did catch a few nice moves, look at CUB and EXM. Not straight up, but pretty good given the circumstances.

Vishal said...

yeah, but this earnings season was nothing like the April May season. A lot of earnings blowouts this season are actually lower than when they reported. This is especially true of the smallcaps.

There are exceptions of course.

AAPL
RIMM
BIDU
ISRG
DE
WYNN
LVS
NOV
CROX
AMZN
PCLN
NILE
DY
GME
DKS
EXM
DRYS
CMG
GRMN
NVT
FCX
UA
TMO
TBSI
PENX
LPHI
MDR
MHS

This is by no means an exhaustive list.

A lot of these sold off initially & then climbed. In some cases it was "sell the news", while some of them sold off due to the little market correction we had.

Jack said...

A friend just used a data mining application from IBD called "Custom Screen Wizard". You can find it in the premium tool section.

From there you set up earnings criteria similar to what Stockbee has written about. IE. 40% or higher, qtr to LYQtr.

He found about 24 stocks using the "screen Wizard".

It's a handy tool but it does cost to use it.

go http://www.investors.com/Default.asp

F-Trader said...

Good clip, Pradeep. Quick question, from your experience, approximately what percentage of an intermediate-term trend does your 65-day method capture? Thanks.

F.

Vishal said...

Some earnings blowouts that are actually lower now :

AVCI
CBST
METH
MOGN
JBL
RECN
GBX

Pradeep Bonde said...

If an earnings is blowout earnings but 3 or 4 th in series of good earnings, you are not likely to find market reacting to it. Only a blowout earnings+ a surpise+ a first or major acceleration + neglect leads to rally.