Keep in mind that median growth rates are inherently equally weighted, so the growth rate for Cabot Oil and Gas (COG) is just as significant to the results for the Energy sector as the growth rate for Exxon Mobil (XOM).

Share repurchases were still very significant in the fourth quarter of last year and the first quarter of this year (the data is not out yet for the second quarter) and the reduction in share count also boosts EPS growth.

Currency translation gains will be less of a factor this quarter due to the rebound in the dollar. However, the strong overseas demand that the previously very weak dollar stimulated will still prove to be a boost to the earnings of many firms. The delay is because in the third quarter they shipped goods ordered previously. Given both the rebound in the dollar, and the very significant economic slowdown abroad, look for the export boom to fade during this quarter and into 2009.

Third-Quarter Scorecard (Reported)
Sector	Q3 08 Median Growth Rep.	Q4 08 Median Proj. Growth.	2007 Median Rep. Growth	2008 Median Proj. Growth	% Reported	Median % Surprise	# Pos Surprise	# Neg Surprise	# Match
Energy	52.19%	10.81%	13.31%	24.10%	100.00%	1.61%	25	13	2
Industrial	13.00%	3.12%	16.67%	10.23%	94.74%	2.24%	37	14	3
Tech	12.50%	-8.11%	17.91%	6.22%	87.84%	4.00%	42	16	7
Healthcare	12.06%	11.82%	18.81%	12.40%	94.34%	3.59%	36	6	8
Cons. Stap.	7.95%	2.17%	11.05%	6.90%	90.24%	1.69%	23	10	4
Materials	0.68%	-10.11%	9.70%	1.14%	100.00%	1.41%	18	11	1
Cons. Disc.	-2.75%	-14.58%	7.87%	-4.08%	80.25%	2.50%	41	16	8
Telecom	-5.63%	-5.63%	-2.94%	4.90%	100.00%	-6.25%	1	7	1
Utilities	-8.04%	-3.30%	9.18%	4.38%	100.00%	-6.27%	11	21	0
Financial	-26.14%	0.00%	6.87%	-14.66%	97.62%	-1.12%	37	41	4
S&P 500	6.67%	0.00%	12.56%	4.95%	92.80%	1.83%	271	155	38

Third-Quarter Yet-to-Report
Sector	Q3 08 Proj. Growth	Q4 08 Proj. Growth	2007 Rep. Growth	2008 Proj. Growth	2009 Proj. Growth
Industrial	190.31%	7.48%	60.60%	10.28%	36.79%
Tech	21.13%	8.82%	23.63%	10.52%	12.68%
Cons. Stap.	13.89%	8.51%	10.50%	10.46%	7.28%
Healthcare	11.43%	17.78%	7.88%	15.35%	11.74%
Financial	-40.26%	5.30%	-17.65%	-122.40%	-86.41%
S&P 500	12.29%	6.16%	11.87%	10.49%	7.45%

Total Net Income Growth

• Total net income of those that have reported down 17.1% from last year
• Total reported net income so far is $159.6 billion versus $192.6 billion for same firms last year
• Those firms earned $173.7 billion in the second quarter
• Results exclude non-recurring items, most of which have been negative
• Combining results with expectations, earnings now expected to be down 17.6%
• Financials down 116.9% so far, a decline of 118.7% expected when all is said and done
• Excluding Financials, earnings are up 10.5% so far
• Five sectors expected to post lower total earnings than a year ago
• Energy is the only sector to post robust growth, up 57.4%; Staples is next at 11.6%
• Excluding Energy, earnings are down 31.0%
• Excluding both Energy and Financials, earnings are down 1.2%
• Expectations for the fourth Quarter call earnings have dropped to 10.4% from 14.8% a week ago; this still looks very optimistic to me. I expect fourth-quarter earnings to be below year ago levels
• Negative year-over-year growth in 4Q now expected for 6 sectors
• Full year net income in 2009 expected to be 6.3% above 2007 levels, down from 8.7% on a week ago. Count me as extremely skeptical, I think earnings in 2009 will likely be lower than in 2008, and far below 2007 levels

Total Net Income Growth (Reported)
Sector	Q1 08 Rep. Growth	Q2 08 Rep. Growth	Q3 08 Rep. Growth	Q4 08 Proj. Growth	2007 Rep. Growth	2008 Proj. Growth	2009 Proj. Growth
Energy	26.00%	17.56%	57.43%	-3.64%	5.91%	29.83%	-8.63%
Cons. Stap.	12.76%	1.88%	11.58%	15.36%	11.49%	12.39%	6.90%
Technology	11.89%	18.05%	7.98%	-13.69%	23.28%	6.03%	12.15%
Health Care	3.39%	8.41%	6.33%	2.52%	19.69%	9.26%	8.43%
Industrials	5.07%	5.83%	0.69%	-1515.20%	11.36%	2.71%	1.60%
Materials	16.43%	4.78%	-0.45%	-17.84%	13.11%	0.35%	-8.08%
Utilities	9.10%	3.76%	-6.79%	2.75%	10.32%	4.36%	7.87%
Telecom	1.41%	-1.11%	-15.97%	-14.62%	17.66%	-3.79%	2.55%
Cons. Disc.	-13.93%	-76.30%	-51.67%	-43.63%	-2.24%	-38.30%	42.89%
Financials	-72.25%	-71.40%	-116.87%	-674.85%	-18.72%	-75.23%	204.89%
S&P	-12.82%	-16.87%	-17.14%	10.84%	3.39%	-10.70%	16.35%

Total Reported
Sector	Q3 08 Income	Q3 07 Income	Q2 08 Income	Q2 07 Income
Energy	$47,432	$30,129	$42,176	$35,876
Health Care	$24,818	$23,340	$24,221	$22,341
Technology	$23,687	$21,936	$23,575	$19,971
Industrials	$22,298	$22,146	$23,486	$22,193
Cons. Stap.	$21,983	$19,702	$19,332	$18,974
Utilities	$8,509	$9,128	$6,222	$5,996
Materials	$6,543	$6,572	$8,513	$8,124
Telecom	$6,397	$7,613	$7,319	$7,402
Cons. Disc.	$4,954	$10,250	$3,115	$13,144
Financials	($7,047)	$41,765	$15,689	$54,855
S&P	$159,574	$192,582	$173,648	$208,876

Total Earnings Growth: Yet-to-Report
Sector	Q1 08 Rep. Growth	Q2 08 Rep. Growth	Q3 08 Proj. Growth	Q4 08 Proj. Growth	2007 Rep. Growth	2008 Proj. Growth	2009 Proj. Growth
Financials	9.88%	8.99%	16.17%	16.59%	6.33%	16.98%	10.83%
Industrials	22.80%	11.01%	7.83%	10.87%	27.17%	24.33%	19.50%
Technology	12.78%	2.24%	4.39%	4.46%	10.69%	20.49%	14.05%
Cons. Stap.	-2.64%	11.33%	3.10%	11.80%	24.80%	10.71%	9.29%
Cons. Disc.	-28.22%	-14.98%	-39.98%	-0.49%	-15.58%	0.37%	8.31%
Health Care	-44.38%	-43.49%	-230.92%	13.09%	-6.53%	-94.77%	626.15%
S&P	-8.94%	-7.10%	-25.69%	4.62%	-1.43%	3.92%	13.41%

Total Earnings Growth: Combined
Sector	Q1 08 Rep. Growth	Q2 08 Rep. Growth	Q3 08 Proj. Growth	Q4 08 Proj. Growth	2007 Rep. Growth	2008 Proj. Growth	2009 Proj. Growth
Energy	26.00%	17.56%	57.43%	-3.64%	5.91%	29.83%	-8.63%
Cons. Stap.	12.06%	2.24%	11.19%	15.19%	12.00%	12.32%	7.00%
Technology	12.02%	15.93%	7.50%	-11.61%	21.64%	7.75%	12.40%
Health Care	3.70%	8.44%	6.75%	3.15%	18.97%	9.63%	8.56%
Industrials	5.67%	5.96%	0.83%	-7.72%	11.66%	3.18%	2.07%
Materials	16.43%	4.78%	-0.45%	-17.84%	13.11%	0.35%	-8.08%
Utilities	9.10%	3.76%	-6.79%	2.75%	10.32%	4.36%	7.87%
Telecom	1.41%	-1.11%	-15.97%	-14.62%	17.66%	-3.79%	2.55%
Cons. Disc.	-18.39%	-57.57%	-48.64%	-30.99%	-6.37%	-27.49%	29.52%
Financials	-71.87%	-71.05%	-118.67%	-713.30%	-18.56%	-75.53%	206.27%
S&P	-12.60%	-16.33%	-17.57%	10.44%	3.14%	-9.97%	16.18%

The Zacks Revisions Ratio: 2008

• Revisions ratio for full S&P 500 up to 0.38, from 0.33 last week
• Health Care by far the strongest at 1.12 in response to earnings surprises
• All other sectors have at least 2 cuts for every increase
• Cuts outnumber increases by more than 3:1 in 6 of 10 sectors
• Ratio of firms with rising to falling mean estimates at 0.31, up from 0.30
• Total number of revisions (4 week total) falls to 3,995 from 4,064 on Tuesday
• Increases up to 1,109 from 1,074; cuts down to 2,886 from 2,990
• Passing the seasonal peak of total revisions activity

For the S&P 500 as a whole, a number below 0.80 or above 1.25 is generally significant. With smaller totals for any given sector than the S&P 500 over all, the ratio should be farther away from 1.0 to be truly significant. However, for the sake of consistency, we refer to readings above 1.25 as being in positive territory and below 0.80 as being in negative territory.

Avg. 4wk EPSChange (FY08)	Avg. 4wk EPS Change (FY08)	Revisions Ratio	Firms With FY08 EPS Increase	Firms With FY08 EPS Decrease
Health Care	0.06%	1.12	31	21
Industrials	-2.28%	0.50	19	36
Consumer Staple	-2.99%	0.43	11	29
Energy	0.51%	0.34	5	35
Technology	-6.41%	0.31	16	55
Financial Services	-9.74%	0.30	20	63
Utilities	-2.97%	0.29	8	24
Materials	-6.37%	0.25	3	27
Consumer Disc	-6.02%	0.23	13	65
Telecom	-5.70%	0.20	1	8
S&P 500	-4.65%	0.38	127	363

The Zacks Revisions Ratio: 2009

• Full S&P 500 2009 revisions ratio at 0.14 up from 0.13 Tuesday
• More than 5 cuts per increase for all other sectors, more than 10 per increase in 4 sectors
• Health Care the "best" at a 0.48 reading
• Ratio of rising to falling mean estimates up to 0.13 from 0.11
• Total number of revisions up to 3,822 from 3,808 last week
• Increases up to 516 from 441, cuts down to 3,306 from 3,367
• Size of cuts horrific: 26% of all S&P firms 09 estimates down more than 15% over last 4 weeks, 13% down more than 25%
• Only thing holding up 2009 expected growth is the decline of 2008 base

Avg. 4wk EPSChange (FY09)	Avg. 4wk EPS Change (FY09)	Revisions Ratio	Firms With FY09 EPS Increase	Firms With FY09 EPS Decrease
Health Care	-3.25%	0.48	17	35
Consumer Staples	-3.90%	0.20	6	34
Industrials	-8.66%	0.19	8	46
Energy	-15.00%	0.16	1	39
Telecom	-4.35%	0.14	1	8
Technology	-13.93%	0.13	5	67
Financial Services	-15.19%	0.09	7	75
Consumer Discr	-13.37%	0.09	4	75
Utilities	-4.13%	0.08	0	31
Materials	-17.47%	0.04	1	29
S&P 500	-10.97%	0.16	50	439

Market Cap versus Total Earnings

When making investment decisions, growth should always be looked at in conjunction with how much you are paying for a stock. Thus, it makes sense to look at the total earnings expected for a sector, relative to that sector's total market capitalization. This is basically a variation on looking at the P/E. The P/Es are calculated as the total Market Capitalization of the sector divided by the total expected earnings for the sector.

Earnings Shares and P/Es
Sector	2007 Growth	2008 Growth	2009 Growth	Market Cap Growth	P/E FY08	P/E FY09
Technology	12.76%	15.10%	14.57%	15.75%	12.31	10.98
Cons Stpl	9.77%	12.21%	11.24%	14.65%	14.15	13.23
Health Care	11.79%	14.39%	13.44%	14.18%	11.62	10.71
Energy	15.51%	22.42%	17.62%	13.27%	6.98	7.64
Financials	21.60%	5.87%	15.49%	12.98%	26.1	8.51
Industrials	11.07%	12.70%	11.27%	10.54%	9.8	9.49
Cons Discr	7.00%	5.61%	6.20%	8.05%	16.95	13.18
Utilities	3.38%	3.93%	3.64%	3.96%	11.9	11.03
Telecom	3.59%	3.84%	3.39%	3.55%	10.89	10.62
Materials	3.53%	3.95%	3.12%	3.08%	9.2	10
S&P 500	100.00%	100.00%	100.00%	100.00%	11.8	10.15

Neil Malkin contributed significantly to this report.

Data in this report, unless stated otherwise, is through the close on Thursday 11/13/2008

Email

Feedback

Print