Disappointing IBM Results Knock IT Sector EPS Growth Down 2%
This week will see close to 130 companies from the S&P 500 release earnings results. This morning started off on a down note when IBM reported EPS of $3.68, missing the Estimize consensus by $0.66. Revenues also disappointed, coming in at $22.4B vs. expectations of $23.5B. Weak profits were due to the offloading of IBM’s chip business for $1.5B and lower-than-expected software sales. CEO Ginni Rometty’s strategy of eliminating lower-margin businesses and prioritizing earnings growth over expanding revenues should help, but she even admits they need to quicken the pace to better compete. “We have more to do and we need to do it faster,” said Rometty on this morning’s conference call.
Of course the big report this afternoon comes from Apple. This quarter is all about the launch of the iPhone 6 and the iPhone 6 Plus. On the opening weekend alone Apple sold over 10 million units of the new models. Analysts and investors agree that Apple is poised for a big quarter, the only question that remains is just how successful this 3 month period will be. Analysts on Estimize are expecting $1.36 in earnings per share (EPS) while Wall Street is looking for $1.30. Estimize contributors also expect Apple to do $40.518B in sales, more than $500M more than Wall Street is predicting. While this should be a great quarter for Apple, next quarter is where the lion’s share of sales will fall. As of this morning the Estimize community is predicting that Apple’s holiday quarter revenue will surpass $65B.
How Are We Doing?
Expectations for S&P 500 earnings growth for the third quarter stand at 9.1%. Revenues are anticipated to come in with 4.4% growth. All 10 sectors are anticipated to post positive YoY growth on both the earnings and revenue front.
Leaders
Earnings:
Energy (13.5%). Notable industry: Oil, Gas & Consumable Fuels (14.5%)
Materials (12.7%). Notable industry: Metals & Mining (23.5%).
Consumer Discretionary (11.5%). Notable industry: Internet & Catalog Retail (22.5%)
Revenues:
Health Care (9.9%). Notable industry: Biotech (38.4%).
Utilities (7.2%). Notable industry: Independent Power & Renewable Electricity Producers (21.9%)
Laggards
Earnings:
Utilities (3.0%). Notable industry: MultiUtilities (0.5%).
Telecommunication Services (4.3%): All five companies are within Diversified Telecom Services. Only Verizon expecting yoy growth.
Revenues:
Energy (0.6%). Notable industry: Oil, Gas and Consumable Fuels (-0.1%).
Materials (1.6%). Notable industry: Paper & Forest Products (-10.9%).
Beat/Miss/Match
Earnings: 86 companies have reported thus far, 49% have beaten the Estimize consensus, 37% have missed and 14% have met. This is compared to Wall Street estimates, of which 63% of companies have beat on the bottom-line, 29% have missed and 8% have met.
Revenue: 52% have beaten the Estimize consensus, 48% have missed, and 0% have met. For revenues, 62% of companies have beat the Wall Street estimate, while 38% have missed.
Disclosure: None.