Investors hungry for more earnings surprises
NEW YORK (Reuters) - Last week's earnings results set a lofty standard for companies in the S&P 500, and with nearly one-third of the index's members due out with results in the next five days, the markets will see if the early positive trend holds.
Coming into this week, 71 percent of Standard & Poor's 500 companies had surpassed earnings expectations, ahead of the long-term average of 61 percent, according to data compiled by Thomson Reuters.
But that's based on reports from just 55 S&P companies. This week, a dozen Dow components and 143 S&P companies are scheduled to report.
Some of the bigger names include chip maker Texas Instruments Inc (TXN.N), Apple Inc (AAPL.O), Caterpillar Inc (CAT.N), Coca-Cola Co (KO.N), Yahoo Inc (YHOO.O), Morgan Stanley (MS.N), Boeing Co (BA.N), 3M Co (MMM.N), American Express Co (AXP.N), McDonald's Corp (MCD.N) and Microsoft Corp (MSFT.O).
While last week's results highlighted big names in the financial and technology arenas, including International Business Machines Corp (IBM.N) and Goldman Sachs Group Inc (GS.N), this week investors will examine scorecards from a broader range of companies whose forecasts might not be as discernible, analysts said.
"A lot of big names came through, setting the tone for a positive season," said Fred Dickson, market strategist at D.A. Davidson & Co in Lake Oswego, Oregon. "We're going to ebb and flow here ... I think it's going to be a mixed bag with some of the smaller companies."
He said international exposure may have helped companies like IBM and Intel Corp (INTC.O), but that might not be the case with smaller companies.
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With the three major U.S. stock indexes racking up their best week of gains in four months on Friday, investors are hoping this week's results add to the optimism. Among the early reporters on Monday, oil-services giant Halliburton Co posted better than expected profits for the second quarter but warned of weak natural gas markets, hurting activity.
So far, investors in companies that have beaten estimates have been rewarded. According to Bespoke Investment Group in Harrison, N.Y., the average one-day gain for companies beating expectations has been 1.47 percent. That's short of the 1.7 percent average gain in the first quarter, but still good for second-best since 2001.
"It's the most forward-looking data at the moment," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.
Thanks mainly to last week's strong results from banks, second-quarter projections had improved slightly by the end of last week, with earnings expected to decline 35.2 percent from a year ago compared with a forecasted decline of 35.7 percent in the previous week.
Goldman, which reported a jump in profit on Tuesday, gave a strong start to the week's reports, followed by IBM and JPMorgan Chase & Co, among others.
"There's a pretty high bar to clear for market leaders in earnings so far," said Craig Peckham, equity trading strategist at Jefferies & Co in New York.
(Additional reporting by Ellis Mnyandu; Editing by Padraic Cassidy)
