The Earnings Upset

 My husband, brother-in-law and friends will never forget one Saturday afternoon spent at “The Big House”.  University of Michigan was playing Toledo and was expected to win by a large margin as they usually did against their regional MAC opponents.  I remember this particular game because they had much-coveted press box seats and sideline passes that my brother-in-law acquired in a charity auction.  They were expecting more excitement from the prestige of visiting the sidelines and sitting in the press box than from the game.  Little did they know what was in store that day.  For the first time ever Michigan lost to a MAC team with a score of 13-10!

The fourth quarter 2012 earnings season started much like the fans’ attitudes for Toledo before this game.  People were dismissing it as a lost quarter and game before it even began.  After Hurricane Sandy and the Fiscal Cliff debacle, many thought earnings would be a bust before they were even reported.  However, a little more than half way through corporate earnings releases, stocks are soaring for the year (at least as of writing this) and earnings are looking half-way decent.

  • Revenue Growth has been solid, up 3.3% so far.  Cost cutting continues to be the name of the game here.  70% of companies that have reported have beaten revenue forecasts, which are above average (66%).
  • Demand from emerging markets has fueled growth at large multinational companies.
  • A Narrowing Trade Deficit for the fourth quarter as reported by the U.S. Commerce Department means we are exporting more and importing less. This keeps more dollars in the U.S. and has also helped boost corporate earnings.

So, while positive earnings are usually the earliest released, it still should be a very decent show for corporate earnings for the end of last year.  Luckily for investors and the University of Toledo critics they now understand, “That’s why we play the game.”  As for my husband and his friends, they did enjoy the excitement of watching kick-off from the sidelines and the free snacks in the press box, if not a Michigan win!

Angela Palacios, CFP®is the Portfolio Manager at Center for Financial Planning, Inc. Angela specializes in Investment and Macro economic research. She is a frequent contributor to Money Centered as well asinvestment updates at The Center.

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