Zacks Earnings Trends Highlights: Caterpillar, Eaton and Illinois Tool Works

2009-11-17 23:05:06 -

Zacks Research Equity Strategist, Dirk Van Dijk says that S&P 500 earnings are continuing to show red ink. He tracks companies on the Zacks.com web site, naming names, while forecasting trends for the months ahead.



Great Earnings Season Coming to an End

It’s almost time to close the books on a fantastic earnings season. With over 90% of reports in, there have

been 353 which have exceeded expectations while only 66 have fallen short, a ratio of 5.35. While it is true that most companies will normally try to under-promise and over-deliver, this quarter the beats are beating the misses by about twice the normal margin of 3:1.

Nor have all the surprises only been by a penny or two, but there have been lots of companies that simply crushed the earnings estimates. The median surprise is a very high 7.11%. Over the last five years, a median surprise of about 3.0% has been normal.

Part of the reason is that expectations were set very low going into the earnings season. For most companies, their earnings are still below year-ago levels, just not as far down as people thought they would be.
Only 202 firms have posted positive year-over-year growth versus 259 which have fallen short of year-ago levels -- a ratio of 0.78.

The disparity between firms beating estimates but having negative year-over-year earnings growth is particularly noticeable in Tech, where the earnings surprise ratio is an awesome 8.50. However, the growth ratio (# of firms with positive growth/# of firms with negative growth) is just 0.60. Energy’s surprise ratio is not quite as high, at 3.38, but the disparity to its growth ratio, at just 0.05, is extreme. Staples and Medical have been both growing earnings and beating expectations.

For Industrials, some of the firms in this sector that have seen double-digit increases in both their mean estimate, and double digit numbers of estimate increases and had no cuts over the last month include Caterpillar (NYSE: CAT : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww .. ), Eaton (NYSE: ETN : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww .. ) and Illinois Tool Works (NYSE: ITW : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww .. ).

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Zacks.comDirk Van DijkDirector of Research312-265-9211Visit:
www.zacks.com : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww ..