Q3 S&P500 earnings surprise wrap-up

• Picture stable with revenues missing expectations by 0.7%
• Earnings 1% ahead of expectations
• Revenue missed in 59% of the reports
• Earnings beat in 64% of the reports

With 90 percent of the Q3 season in the bag and as expected no real big changes during last week it is unlikely the tail of the season will be able to change the overall picture. That picture so far reveals that revenues are trailing expectations by 0.7 percent and earnings are 1.0 percent ahead of expectations, see table 1. The most spectacular misses at a sector level are in Utilities where revenues are 8.4 percent. Materials is the runner up with a revenue miss of 2.3 percent. On the positive side we have Financials beating on “revenues” by 2.2 percent.

On earnings we have a wide range of both big misses and much better results. Of the big earnings misses the main highlights are: Advanced Micro Devices (NYSE:AMD), Electronic Arts (NASDAQ:EA), WPX Energy (NYSE:WPX), JCP Penny (NYCE:JCP), Prologis Inc (NYSE:PLD), E*Trade Financial (NASDAQ:ETFC) and Amazon (NASDAQ:AMZN), all missing earnings by more than 150 percent. On the positive note we had Alcoa (NYSE:AA), Computer Science (NYSE:CSC), Forest Lab (NYSE:FRX), Suntrust Banks (NYSE:STI) and United States Steel (NYSE:X), all beating EPS by more than 100 percent.

Overall it was an earnings season where analysts have had a too positive view of the situation despite the high level of negative guidance from companies in connection with the previous season. For Q4, guidance remains negative with CEOs worried about the end of 2012. This will put pressure on analysts' expectations for Q4.

The surprise matrix
In short, there have not been any major changes to the overall picture. Companies have surprised in 64 percent of the reports. Of concern though is the level of revenue misses which is at 0.7 percent, making it one of the biggest drags on investor sentiment this earnings season.

Investors maintained overall price reactions with an average drop versus the S&P500 of 0.4 percent. This is a signal that investors have been too optimistic, see table 3. For more in depth analysis of the table please refer to some of the former articles at the end of this article.

This week
The season is 90 percent over but the week still provides reports from at least three interesting companies. I recommend looking at Target (NYSE:TGT) and Wal-Mart (NYSE:WMT) for a gauge on consumers in Q3 and Cisco (NASDAQ:CSCO) regarding the tech sector.

Read also:

This research could be of interest too:

1. The S&P 500 earnings season starts today: A Helicopter View 
2. S&P500 Q3 earnings: Dour tone despite positive EPS surprise
3. S&P500 Earnings: Analysts cut growth outlook for 2012 and 2013
4. S&P500 Earnings: Companies revenue misses are a big concern
5. S&P500 Q3 revenue still struggling; Q4 guidance is negative

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