Q1 EARNINGS REALITY CHECK

Posted by: Howard Silverblatt on April 28, 2008

Q1 2008 S&P 500 operating earnings as of the close of 4/25/2008
263 issues reported (52.6%), representing 61.07% of the market value

43.5% beat their estimate and 53.1% did not -> historically over 60% beat their estimates
60.1% beat last years value, 38.0% did not
25.9% of Financials posted earnings gains; 69.8% of non-Financials did
49.8% of the non-Financials are expected to post at least a 10% earnings gain (27.2% so far and another 22.5% are expected to do so)

Expect quarter to post a -12.6% decline over Q1 2007
Ex/Financials the index is expected to post a 10.8% gain
The good news is that there was no major negative news; optimism lives
Earnings Shift:
Q1 2008 20% is coming from Energy and 11% from Financials
Q1 2007 14% was from Energy and 30% from Financials

Q2 expected to be down 5.1%, and Q3 & Q4,’08 are expected to show strong increases (very weak comparisons)
2008 estimated to increase 11.8%, but is due to poor 2007 and Energy’s increased contribution
2009 estimated to increase 21.5%, but estimates lack charges and there could be gains due to reversals of prior charges

21 unreported Energy issues are expected to report 14% of the S&P 500 earnings, with their average year-over-year gain averaging 30% (11 of them are expected to post at least a 30% gains); Q1 energy will contribute 20% of the S&P 500 earnings and Q2 is estimated to contribute 19.6%
Wednesday is the Fed meeting and Q1 GDP (S&P expects a 25 point cut and a 0.5% gain) and Friday is the employment numbers (down 50,000 jobs with 5.2% unemployment), since we have nothing for Thursday, XOM will announce their earnings. Street numbers point to another world record in quarterly sales, and a tad under the $11.66B world quarterly earnings record, which was set by XOM in Q4 of 2007 (with any positive surprise setting a new world earnings record, and don’t forget about their current 30 consecutive quarters of share count reduction, courtesy of the buybacks - they spend the most, $80B over the last 3 years).

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Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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