North American Equity Strategy - Q3/13 Earnings Recap
by Ryan Lewenza, North American Equity Strategist, TD Wealth
Highlights
November 22, 2013
• With the majority of S&P 500 Index (S&P 500) companies having reported Q3/13 results, earnings per share (EPS) are projected to reach $27.08, which equates to year-over-year (Y/Y) growth of 9%. Earnings results did surpass consensus estimates of $26.93 as of the end of the quarter, however, estimates were consistently revised lowered over the quarter, with results beating the lowered bar.
• 75% of S&P 500 companies beat analysts’ earnings estimates. This result was up from the 71% beat rate in Q2/13 and well above the long-term average of 62%.
• Another positive result this quarter was the expansion in margins, with net profit margins increasing to 9.7%, up from the trough of 8.9% in Q4/12. Profit margins remain incredibly strong, defying some pundits that have called for them to peak and head lower. Since 1998, net profit margins have averaged 7.8%, and at 9.7%, net profit margins are over 1 standard deviation above the long-term average.
• The S&P/TSX Composite Index (S&P/TSX) is projected to deliver Q3/13 EPS of $200.50, which would equate to Y/Y growth of 5.0%. This reverses a trend of negative to flat earnings growth, which has been the case over the last seven quarters. While earnings growth did improve, the breadth of revenue/earnings beats was quite narrow, with 45% of companies beating analysts’ estimates on the top line, and 50% of companies beating on the bottom line.
• Overall, the earnings season was better than expected in the U.S., summarized from our end with a B+ rating. Results were generally weaker in Canada, and as such, we score the Canadian Q3/13 earnings season a C+.
You may read or download the entire report in the slidedeck below:
NA Equity Strategy (Q313 Earnings Recap) - November 22, 2013
