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Sam Subramanian

S&P 500 Stocks: Third Quarter Earnings Update

Sam Subramanian PhD, MBA

The earnings report season is in full swing. More than 130 of the S&P 500 member companies are reporting their third quarter results this week. Here is a sampling of earnings reports from a selected group of large companies spanning different sectors with economically sensitive business.

General Electric (GE): Industrial conglomerate General Electric reported EPS of 22 cents a share, exceeding analysts' forecast by 8%. The global titan's revenue however declined 20% and fell short of analysts' forecast by 4%. Revenue declined in all of the conglomerate's diverse business segments with the Energy Infrastructure segment reporting the lowest decline at 9% drop. Even a massive tax gain could not prevent an 87% decline in profits at GE Capital, the company's money lending unit.

JPMorgan Chase (JPM): The second largest U. S. bank by assets JPMorgan Chase earned 82 cents a share, thrashing analysts' 52 cents a share forecast by 58%. These results follow a string of massive positive earnings surprises. As in prior quarters, JPMorgan's investment banking division is thriving from larger spreads and less intense competition in a post-Lehman world. The bank's traditional lending segment however continues to pose problems and the bank added $2 billion to loan-loss reserves in the quarter.

Apple (AAPL): In-demand products enabled technology company Apple to post its sixth straight double-digit earnings surprise. Apple earned $1.82 a share, beating analysts' estimate by nearly 28%. The company sold 3.05 million Macs and 7.4 million iPhones, both quarterly records. Apple is among the few companies that is able to pull off positive year-over-year revenue comparisons. The company's quarterly revenue increased 25% to nearly $10 billion.

Freeport-McMoRan Copper & Gold (FCX): The world's largest publicly traded copper producer Freeport-McMoRan Copper & Gold earned $2.07 a share barreling through analystsí $1.34 estimate by a wide 54% margin. Even though third quarter revenue declined 10% year-over-year, the top line encouragingly increased over 12% from the second quarter. Freeport benefited from strong global demand for copper as well as massive cost cuts. Notably, the company reinstated its 60 cents a share annual cash dividend.

What are Earnings from S&P 500 Stocks Saying?

S&P 500 Stocks Having managed earnings expectations well, companies are having little trouble exceeding guidance. According to Bloomberg, 79% of the companies that have reported third-quarter earnings have exceeded analysts' forecasts.

Revenue growth is hard to come by. Companies that lack in-demand products are generally having trouble demonstrating year-over-year-revenue growth. Revenue has declined over 2% for the S&P 500 companies that have reported third-quarter results and lagged analysts' forecast.

Stock prices as measured by the S&P 500 are up 62% from the March 6 intra-day bottom. The index now trades at nearly 20 times reported operating earnings, the highest since 2004. Equity valuation metrics appear to be implying a robust recovery. While certain economic indicators do support such expectations, corporate revenues do not.

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AlphaProfit MoneyMatters is a free e-letter distributed to registered users of AlphaProfit's website. The e-letter analyzes the economy, markets, and sectors and provides money-making insights on stocks, exchange-traded funds, and mutual funds. AlphaProfit MoneyMatters is edited by Dr. Sam Subramanian acclaimed for his financial acumen and analytical skills.

AlphaProfit Investments, LLC is an independent investment research firm based in Sugar Land, TX. AlphaProfit publishes the AlphaProfit Sector Investor's Newsletter, edited by Dr. Sam Subramanian. Leveraging sector funds, the Newsletter provides high-performance model portfolios with Fidelity funds and exchange-traded funds. It also includes actionable stock recommendations. This newsletter features among MarketWatch's top 10 investment newsletters and has won the coveted #1 rank from Hulbert Financial several times.


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