I read a FactSet Earnings Insight report last night and it re-affirmed to me my notion that 2014 will be predominantly a stock pickers market. The high flying tech names such as Tesla (TSLA) or Netflix (NFLX) will continue to fly as long as they continue to execute, which in all fairness, they have. However, vis-à-vis the recent economic and earnings data being released, some of the best performing stocks of 2014 will be driven by the value investor. Below is a bullet proof summary of what I found exclusively important from the report.
- Out of 123 companies that have reported 2013 Q4 earnings, 68% have beaten analyst EPS estimates. This compares to 73% of companies beating estimates over the past 4 years and 71% of companies beating estimates over the past 4 quarters.
- Thus far into earnings season, aggregate company earnings to beat Wall Street expectations have trended below average.
- Also out of 123 companies, 67% of companies that have reported 2013 Q4 earnings have beaten analyst revenue estimates. This compares to just 59% of companies beating analyst estimates over the past 4 years and 54% beating top-line estimates over the past 4 quarters.
- Thus far into earnings season, average company revenues to beat analyst expectations have trended above average.
- The average company to beat analyst EPS expectations has surprised by 2.7%. Over the past 4 years EPS surprises have averaged 5.8%; they have averaged 3.3% over the past year.
- The average company to beat revenue estimates has surprised by 0.7%. This number is better than the 4 year average of 0.6% and the 1 year average of revenue surprises, which is 0.4%.
I have held tight to the preconception that top-line revenues will be influential to market sentiment: however as per the above data, is it possible that bottom-line disappointment is aiding the recent sell off? Frankly, who knows? I don't. All I know is that as we move through a period that will likely leave many investors puzzled, I'll be focused on the fundamentals of businesses. I'm looking for strong balance sheets, good value, and as always; a way to make money with defined risk.
Below is a chart of TTM PE values over the past 10 years.
Below are tables detailing 2013 Q4 EPS and revenue growth, segmented by sector.
Below is a table listing 12-month forward PE ratios, segmented by sector.
|Sector||Forward 12-Month PE Ratio|
*All chart and table data provided by www.Factset.com