16 Jul The Lato Letter: Volume 1, Issue 21.
As we head into the real start of the second quarter earnings season this week, I thought the following headline and opening paragraph from Friday’s report from JP Morgan’s strategist, Thomas Lee, summed things up pretty well.
Expectations have been lowered significantly over the past quarter which could lead to a pleasant surprise as the worst fears are not realized.
2Q12 S&P 500 EPS: Poor Visibility + Pre-announce = NERVES
2Q tracking to $26. $105 EPS on track…looks a lot like 4Q11 and 1Q12. Stay constructive and patient.
“Anxiety into 2Q is high. Investors, seemingly, are at the cliff edge, concerned that a lousy 2Q is the final straw confirming the downturn in global economic momentum and thus, cause equities to tumble. In other words, poor visibility along with weak markets is a formula for potential panic. However, as the 2Q12 earnings season moves along, we believe investors will ultimately find the glass half-full.”
Since the end of the first quarter, consensus estimates for the second quarter have been reduced by over 3% from their earlier levels. All of the previously mentioned concerns (see The Lato Letter Quarterly – Summer 2012) have no doubt influenced the estimates, which were already calling for slower growth heading into the quarter.
Among the major holdings in most client portfolios, the following are the release dates and the current quarterly consensus estimates:
|July 17||Goldman Sachs||$1.45|
|July 19||Shoppers Drug Mart||$0.70|
|July 26||United Technologies||$1.43|
|Aug 9||Cdn Natural Resources||$0.58|
|Aug 30||TD Bank||$1.85|
I will update the list periodically as the companies report but the good news so far, is that none of the companies on the list has issued a warning with respect to their earlier guidance. One quarterly earnings report does not make or break a company or a stock but earnings ultimately do drive the share price and so must be monitored along with many other factors.
Finally, I will be appearing on BNN’s Market Call at 1pm on Wednesday, July 18th which also happens to be Gini’s (my wife) birthday. You’ll have to ask her which one.
You can watch the show after it has aired by visiting the Library section of this website.
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