Q1 Earnings Summary

The first quarter is now in the far distant past (in Wall Street time), but it was a very good earnings season. Dirk van Dijk looks at the details:

The first quarter earnings season is almost done. We now have 496 (99.0%) of the S&P 500 reports in. Net income growth is 17.12%. While that is down from the extremely strong 30.9% that 495 of those firms posted in the fourth quarter, it is still a very strong growth rate. Almost all of the growth slowdown is from a failure of the Financial sector to repeat the massive growth they posted in the fourth quarter.

It’s not that the Financials are having a bad quarter, but they do face much tougher comps this time around. The 8.7% year-over-year growth they are reporting is not exactly awful (although it is below the rest of the S&P 500), it is that it pales in comparison to the 161.8% growth posted in the fourth quarter. That is despite a very strong sequential growth of 22.0%.

If we back out the Financials, total net income is up 19.2%, down just slightly from the 19.8% those firms reported in the fourth quarter. Looking ahead to the second quarter, growth is expected to continue to slow, falling 10.1%. Back out the Financials and growth is expected to be 12.6%.

Before the first quarter earnings season started, it was expected that growth would be just 6.7% for the S&P 500 as a whole, and 10.2% excluding Financials. Given the upward estimate momentum (more below) it seems highly likely to me that the actual growth in the second quarter will be significantly higher than the 10.1%/ 12.6% now expected.

Once again, the big story has been margin expansion but that trend is quickly coming to an end. Wall Street currently expects the S&P 500 to earn $95.49 for 2011 and $109.41 for 2012.

Posted by on June 8th, 2011 at 10:14 am


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