Ahead of Wall Street - Nov. 16, 2012 - Ahead of Wall Street
16 11월 2012 - 5:56PM
Zacks
Friday,
November 16, 2012
The ‘Fiscal
Cliff’ debate is all the rage at present as negotiations between
Congress and the White House get underway today. But the two sides
remain poles apart, notwithstanding their conciliatory postures and
a resolution, even a temporary one, may not emerge for quite some
time. Importantly, the odds of going over the ‘cliff’ are
non-trivial, which means that we shouldn’t expect this issue to go
away anytime soon.
‘Fiscal Cliff’
aside, we get the October Industrial Production report a little
later, with expectations of a moderation in the growth pace from
last month’s level. Given the soft international backdrop, any
level of positive growth in the industry sector is welcome. But one
has to be wary of the sustainability, if not the prospect for
improvement, of this trend given how much international demand has
been behind sector’s momentum.
The monthly
ISM survey, which is basically a sentiment indicator, appears to
have started improving after showing persistent weakness in the
summer months, assuming Thursday’s weakness in the Philly Fed and
Empire State readings were Sandy-related. But the monthly Durable
Goods orders, which reflect actual ground reality, has been far
less inspiring.
Recent data on
China’s factory sector show signs of life, but the picture in
Europe, Japan and elsewhere remains downbeat. This goes on to show
that while the Fiscal Cliff uncertainty is a big deal in the near
term, it is hardly the only issue on the horizon.
Dell’s (DELL) travails, as reflected in its
quarterly earnings report after the close on Thursday, is due
mostly to the secular shift in demand for desktops and laptops due
to the popularity of tablets. Hewlett-Packard
(HPQ) is essentially in the same boat as well. That said, it would
not be correct to put the entire blame on this phenomenon and not
acknowledge the subdued corporate capital spending picture that has
repeatedly come out from the earnings reports of such bellwethers
as Microsoft (MSFT), Intel (INTC)
and IBM (IBM).
The Tech
sector’s third quarter earnings performance clearly tells this
story. Total third quarter earnings in the Tech sector are down
7.9% from the same period last year, while revenues in the sector
are down 9.1%. Only 60% of the sector’s companies have beat
earnings expectations, which is weaker than the aggregate average
for the S&P 500 as a whole (the ‘beat ratio’ for the index is
62.6%, as of this morning). Given the Tech sector’s status as the
largest earnings contributor to the S&P 500 and its profile as
the perennial growth driver, this state of affairs raises doubts
the current quarter and beyond.
There isn’t
much to write home about the earnings picture beyond the Tech
sector, either. As of this morning, we have third quarter earnings
reports from 476 companies in the S&P 500, or 95.2% of the
index’s total membership. Total
earnings for these 476 companies are down 4.7% from the same period
last year, with 62.6% of the companies beating earnings
expectations.
The growth rate looks even weaker when Finance is
excluded from the aggregate numbers. Excluding Finance, total third
quarter earnings are down 9.8%. Estimates for the fourth
quarter have come down by more than half since the start of the
third quarter reporting season, but full-year expectations for 2013
still remain elevated and likely need to come down.
What this
means is that while the Fiscal Cliff debate is dominating
everything else at present, it is by no means the only issue that
we need to be concerned about.
Sheraz
Mian
Director of
Research
DELL INC (DELL): Free Stock Analysis Report
HEWLETT PACKARD (HPQ): Free Stock Analysis Report
INTL BUS MACH (IBM): Free Stock Analysis Report
INTEL CORP (INTC): Free Stock Analysis Report
MICROSOFT CORP (MSFT): Free Stock Analysis Report
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