Goldman: Investors More Likely to ‘Punish Misses Than Reward Beats’
By Steven Russolillo
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Some early lessons from the start of earnings season: Investors have been more likely to sell stocks of companies that miss expectations rather than buy those that beat estimates.
That’s what Goldman Sachs concludes about 20% of the way through the current reporting period.
So far 52% of the companies that have reported results and have beaten estimates on either earnings or revenue have witnessed their stock prices outperform the S&P 500 the next trading day, according to Goldman.
Meanwhile, 77% of the companies that have missed on at least one metric have underperformed the next day, Goldman says.
Earnings season will pick up in earnest this week, with more than 80 S&P 500 companies scheduled to report quarterly results DuPont's fourth-quarter profit fell 70% from a year ago, although the diversified manufacturer said it expects earnings to rebound in the second half of the year. Shares rose 1%.
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Shares of Verizon Communications Inc. also edged up even after the company reported a fourth-quarter loss Johnson & Johnson fell after forecasting lower-than-expected 2013 profits.
Tech stocks in particular will soon take the spotlight as more than half of the S&P 500's tech sector is scheduled to report this week. Google and IBM are on the docket later Tuesday, Apple Inc., and Netflix Inc. are scheduled to report on Wednesday and Microsoft and Nokia will report Thursday.
“The tech sector represents the biggest risk to earnings,” says Amanda Snieder, an analyst at Goldman Sachs.
Analysts currently expect fourth-quarter earnings to grow 4% from a year ago, according to S&P Capital IQ, down from the 9.6% growth projection in October.
With the S&P 500 up about 4% throughout the first three weeks of the year, it’s no wonder investors may not be so forgiving when it comes to rewarding or punishing stocks based on earnings results over the next few weeks.
“So far, the market appears more likely to punish misses than reward beats,” Snieder says. |
