Due in part to negative EPS guidance, analysts have lowered
earnings expectations for the third quarter. The estimated earnings growth rate
for Q3 2013 is 4.8%, down from an estimate of 6.9% at the start of the quarter
(June 30). Seven of the ten sectors have recorded a decline in expected
earnings during this time, led by the Materials and Information Technology
sectors.
The
Materials sector has seen the largest drop in expected earnings growth (to 1.1%
from 15.3%) since the start of the quarter. Companies in the Metals &
Mining industry have witnessed the largest cuts to estimates during this time. The Information Technology sector has
witnessed the second largest decrease in expected earnings growth (to 1.8% from
5.5%) since June 30.
Although
analysts have reduced earnings growth expectations for Q3 2013 (to 4.8% from
6.9%) and Q4 2013 (to
11.1% from 12.1%) since June 30, they still expect a significant improvement in
earnings growth in the second half of 2013 relative to the 1st half of 2013. For Q3 2013, two of the ten sectors are
projected to see double-digit earnings growth: Financials (11.7%) and Consumer
Discretionary (10.0%).
However,
estimated revenue growth rates for both Q3 2013 (2.8%) and Q4 2013 (0.7%) are
expected to be below estimated earnings growth rates, particularly for Q4 2013.
No sector is expected to see double-digit revenue growth in either quarter.
Interestingly
enough, earnings estimates for 2013 continue to decline (as they have all
year). Current expectations are for
$108.50 for fiscal 2013 as of July 31st, down from roughly $112.00 in January,
and down from roughly $110.50 at the end of April. It is highly unlikely markets can continue to
rise if earnings estimates continue to decline.
