U.S. companies surprise by posting stronger earnings, revenue

NEW YORK Thu Jan 31, 2013 6:00pm EST

NEW YORK Jan 31 (Reuters) - U.S. companies are turning in stronger-than-expected earnings for the fourth quarter, and in a departure from the previous two quarters, a majority are also reporting higher-than-expected revenue.

That could be a sign of demand, or just reflect the fact that analysts had cut estimates sharply heading into the results. The potential for a "fiscal cliff" disaster, damage from storm Sandy and still-sluggish global economic growth kept worries high, strategists said.

"They set kind of a low bar," but the percentage of companies beating revenue estimates "is still catching people by surprise," said Allan Flader, senior vice president at RBC Wealth Management in Phoenix, Arizona.

"That's really been a good sign for the market."

The benchmark Standard & Poor's 500 index is up 2.5 percent since Alcoa reported results Jan. 8. The S&P 500 posted a 5.1 percent gain for all of January, its best monthly increase since October 2011.

With the earnings season roughly half over, 69 percent of S&P 500 companies are beating analysts' expectations, above the long-term average of 62 percent, Thomson Reuters data showed.

On the revenue side, 66 percent so far are surpassing estimates, above the 62 percent average. The proportion also is above the 39 percent of companies beating for the third quarter and 41 percent for the second quarter.

Earnings growth is now expected to have risen 3.7 percent, up from a forecast of 1.9 percent three weeks ago but well below the 9.9 percent growth for the fourth quarter forecast in October.

Revenue growth has improved as well. The growth forecast is now at 2.4 percent, up from a 1.9 percent three weeks ago.

Europe was not as much of a negative as many thought it would be, Flader said. "Everybody accepted Europe for dead, and it's helping."

Among S&P sectors, technology is so far leading in earnings beating expectations, with 81 percent reporting above estimates. Energy, industrial and consumer discetionaries all so far have more than 70 percent of companies reporting above expectations.

"To see revenue beats come back and be significant, I think that's encouraging," said Jerry Webman, chief economist for OppenheimerFunds in New York.

"It suggests there's economic activity, and when there's economic activity, money is going to be made."

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