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Zacks Earnings Trends Highlights: Bank of America, Verizon and Travelers

CHICAGO, Feb. 7, 2014 /PRNewswire/ -- Zacks Director of Research Sheraz Mian says, "In some respects, the Q4 earnings season is an improvement over the recent past."

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How Good Is the Earnings Picture?

With respect to the Scorecard for 2013 Q4, we have seen results from 334 S&P 500 members accounting for 77.9% of the index's total market capitalization. Total earnings for these companies are up +11.4% from the same period last year, with 69.8% beating earnings expectations with a median surprise of +2.5%. Total revenues for these companies are barely in the positive, up only +0.1%, with 58.7% beating revenue expectations with a median surprise of 0.8%.

The +11.4% 'headline' total earnings growth rate definitely looks fairly robust, particularly when compared to the growth rate for this same group of 334 companies in the last few quarters. Easy comparisons for three companies – Bank of America (NYSE:BAC-Free Report), Verizon (NYSE:VZ-Free Report), and Travelers (NYSE:TRV-Free Report) – account for a big part of the strong Q4 earnings growth. Exclude these three and total earnings growth for the S&P 500 companies that have reported drops by almost half. Performance on the revenue front is notably weak relative to recent quarters, dragged down by weakness in the Finance and Energy sectors.  

The composite picture for Q4 – combining the results for the 334 companies that have reported already with the 166 still to come – is for earnings growth of +9.1%. This will be the highest quarterly growth pace of 2013, with easy comparisons playing a non-trivial role propping up the growth rate. But it's not all easy comparisons, as total earnings for the index are on track to reach a new all-time quarterly record.

Trends on the estimate revision front have been negative for a while, but we could afford to overlook such details in the Fed-inspired rally. It will be interesting to see if investors will continue to shrug estimate cuts in the post-QE world.

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