Classifieds | Archives | Jobs | About TGT | Contact | Subscribe
 | 
Last updated 1 hour, 6 minutes ago
Printer Friendly Version | TGT@Twitter | RSS Feed |
HOME LOCAL MIDEAST ASIA WORLD BUSINESS SPORT OPINION WRITERS
Goods sellers post upside earnings
November 20, 2012
 Print    Send to Friend

NEW YORK: Major sellers of discretionary goods posted upside earnings surprises at the tail-end of the earnings season.

This helped the S&P 500 stock index end the quarter about even from a year earlier. Analysts had expected companies in the index to post  the first quarterly earnings decline in three years.

Consumer discretionary stocks show signs of strength that much of the S&P 500 does not - double-digit year-over-year growth, a high percentage of companies beating analyst forecasts, and strong growth projections for coming quarters.

“Consumer sentiment has been improving steadily and this is affecting retailers to some extent, and retailers are also getting a boost from consumers getting their own fiscal matters in order,” said Bryant Evans, investment advisor and portfolio manager at Cozad Asset Management, in Champaign, Illinois.

The consumer sector’s strength is a hopeful sign for the US economy although it does not mean US growth is roaring.

Uncertainty about Washington’s wrangling over the fiscal cliff, and weak demand worldwide, could change the US outlook in a hurry.

Still, reduced exposure to Europe and other weak overseas markets helped sellers of electronics and home improvement goods outperform the rest of the equity market. With results in from most companies, S&P consumer discretionary sector earnings are up 12.1 per cent from a year ago, the only sector boasting double-digit growth.

Strong consumer sentiment in recent months has boosted retail sales. US consumer confidence rose last month to its highest level since February 2008, according to data from the Conference Board.

The household debt service ratio - an estimate of the share of debt payments to disposable personal income - fell to 10.69 per cent in the second quarter, the most recent data available, according to the Federal Reserve. It was the strongest ratio since the fourth quarter of 1993.

By contrast, CEO confidence remains weak. A Business Roundtable survey released in September showed its index of CEO confidence fell to its lowest point since the third quarter of 2009.

A Thomson Reuters analysis shows earnings growth for 10 of the biggest consumer discretionary companies, including Home Depot and Target, is at 10.3 per cent.

This is much stronger than 10 S&P 500 companies with heavy international exposure such as Coca Cola Enterprises and Cisco Systems. These show earnings growth declining 2.9 per cent from a year ago.

The euro zone’s debt crisis has dragged the bloc into its second recession since 2009 in the third quarter.

S&P 500 earnings for the third quarter are flat from a year ago, even though a majority of companies have missed revenue expectations. Of companies that have reported, 61 per cent have missed revenue expectations for the third quarter.

Without consumer discretionary stocks, S&P 500 quarterly earnings would be down 1.1 per cent, Thomson Reuters data shows. Analysts had predicted the first decline in earnings since 2009.

The percentage of companies beating expectations in the sector, at 75 per cent, far surpasses the 65 per cent for the entire S&P 500, according to Thomson Reuters data. 

Shares have outperformed as well. The S&P consumer discretionary index is up 14.6 per cent for the year, while the S&P 500 is up 7.3 per cent.

On Thursday, US retailer Target one of the 10 largest consumer discretionary names by market value - posted profit that beat analysts’ expectations. Wal-Mart, the world’s biggest retailer, posted disappointing sales and said store traffic in China declined again. Wal-Mart, a consumer staples stock, derives 28 per cent of its sales from overseas.

Surprisingly strong results also came this week from clothing retailers Gap and Abercrombie & Fitch, both of which also raised their full-year outlooks. Gap’s stock had already surged this year, up 81 per cent since the end of 2011, while Abercrombie’s stock surged 30 per cent this week. Many analysts say the mostly stronger-than-expected results from retailers signal that holiday sales could be strong this season despite a sluggish US economy.

“The housing market has been posting some really really encouraging data. That should send nice ripple effects across the economy, a multiplier effect through the consumer,” said Natalie Trunow, chief investment officer of equities at Calvert Investment Management in Bethesda, Maryland, whose firm manages about $13 billion in assets.

Reuters

Add this page to your favorite Social Bookmarking websites
Comments
 
Post a comment
 
Name:
Country:
City:
Email:
Comment:
 
    
    
Related Stories
Dallas firm has substitute for plastic grocery bags
Shoppers are being forced to change how they tote their groceries home. Those plastic bags that often get repurposed to carry out clumps of cat litter or transport muddy ..
Delaware becomes first state to move to cloud computing
Seven years ago, the state of Delaware started moving computer servers out of closets and from under workers’ desks to create a consolidated data center and a virtual com..
Private sector meteorology
NEW YORK: When it comes to guessing the weather, energy companies are throwing less caution to the wind. Analysts and experts say energy companies are increasingly se..
Loomis Sayles bought junk bonds during sell-off
NEW YORK: Dan Fuss, vice chairman and senior portfolio manager at Loomis Sayles, said he purchased some below investment-grade credits during last week’s sell-off at “rea..
Honeywell forecast projects moderate business jet growth
Honeywell Aerospace’s new business jet forecast projects moderate delivery growth in the next two years as companies introduce new models. Over the next 10 years, the ..
 
FRONTPAGE
 
GALLERY
 
PANORAMA
 
TIME OUT
 
SPORT
 
 
Advertise | Copyright