At the end of July we first looked at how 2Q earnings were impacting forward EPS estimates of companies in the Dow Jones Industrial Average (DIA) (here). Now that the earnings cycle is complete we are updating our analysis. Interestingly, since the beginning of 2Q 2012 earnings season there has been a divergence between the price action of the Dow Jones Industrial Average and the forward EPS estimates of companies in the index. The Dow Jones Industrial Average is up 2.5% since the release of Alcoa's (AA) 2Q results on July 9, but the median EPS estimate for the September quarter is down -3%. The EPS estimates for the following quarter and next year are also down over this period. The Dow Jones Industrial Average's ability to rally with a backdrop of bad news, in terms of EPS estimates, seems like a positive for the market. Stock prices seem to have already priced-in the expected EPS weakness and there are now other catalysts driving the market higher. In the article below we take a closer look at the forward EPS estimates as well as the valuations of the components in the Dow Jones Industrial Average.
To continue reading, please click here.
Showing posts with label Dow Jones Industrials Average (DIA). Show all posts
Showing posts with label Dow Jones Industrials Average (DIA). Show all posts
Monday, September 3, 2012
Tuesday, July 31, 2012
A Look At Changes In Forward EPS Estimates For The 22 Dow Jones Industrials Companies That Reported 2Q Results
Twenty two companies in the Dow Jones Industrials Average (DIA) reported 2Q 2012 earnings so far. Coming into earnings season many CEOs lowered their guidance and equity analysts reduced their estimates. This weakness showed up in the results as many companies reported revenue below (reduced) estimates, though often earnings were in-line or above (reduced) estimates.
We want to analyze how equity analysts are adjusting their 2H 2012 and FY 2013 estimates now that the 2Q results for most of the Dow components are out. In our analysis below we show that 2H 2012 earnings estimates are coming down, indicating that the news from 2Q may be worse than expected. FY 2013 estimates are declining as well and may be prone to more reductions. Recent reductions may have already been priced into stock prices, but we are interested in seeing how long earnings estimates continue to be cut and when the trend reverses.
We want to analyze how equity analysts are adjusting their 2H 2012 and FY 2013 estimates now that the 2Q results for most of the Dow components are out. In our analysis below we show that 2H 2012 earnings estimates are coming down, indicating that the news from 2Q may be worse than expected. FY 2013 estimates are declining as well and may be prone to more reductions. Recent reductions may have already been priced into stock prices, but we are interested in seeing how long earnings estimates continue to be cut and when the trend reverses.
Subscribe to:
Posts (Atom)