Everybody Beating Estimates!

• Posted by Adam Warner
• on July 28th, 2010

MKM Partners looks at earnings season.

Through yesterday, 39% of the S&P 500 Index constituents had released second quarter earnings since July 12. Eighty-three percent of the companies have reported EPS above consensus forecasts, which, although down from the recent trend, is still above the record of 79.5% in 3Q09. Top-line results continue to lag, with 67% of companies reporting sales above consensus forecasts…..

…Transportation stocks have been notable, with six of nine constituents reporting better-than- expected results. The group has returned 10% since the July 2 lows, second only to Automobiles & Components (+20%). Interestingly, these two Industry Groups, along with other top performers over the same period including Real Estate, Capital Goods and Semiconductors, have the highest relative skew, suggesesting that investors remain skeptical of the recent rally.

OK, I know this isn’t a new or insightful point by me, but how ridiciulous is it that 83% of company’s beat The Estimate. What is exactly the point of of the exercise, to let TV Pundits swoon about how great every company is doing?

I guess a better question though is what are the 17% or so of company’s that miss doing wrong? Haven’t they figured the game out? Guide low, beat, guide low again.

As to options pricing, kind of mixed bag in that department. High profile names have made moves entirely within their expected range (AAPL) out their range (NFLX) outside the range then back in just in time to whipsaw options shorts (AMZN) and so on. All suggests volatilty is about right overall.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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