News Column

Revenue Misses Add Up Early in Earnings Season

April 19, 2013

Wall Street isn't expecting Corporate America to wow investors with how much money they made in the first quarter of 2013. With analysts having already ratcheted down their earnings-per-share growth projections to 1.78% vs. a year ago, according to S&P Capital IQ, the likelihood of companies topping those lowered expectations is high. That's the good news.

The bad news? Top-line growth, better-known as revenue or the cash that companies bring in from sales, is again coming in short of what Wall Street had expected. Of the 82 companies in the Standard & Poor's 500-stock index that have already reported first-quarter earnings, only 44% have topped revenue forecasts, according to Thomson Reuters.

While it's early in the reporting season, the current beat rate is below the 10-year average of 62% of companies topping top-line estimates. It's also well below the even lower 52% beat rate over the past four quarters.

In the past 24 hours, a slew of companies have reported weaker-than-expected revenue forecasts, including financial services giant American Express, online retailer Ebay, smartphone seller Verizon and investment bank Morgan Stanley.

Investors on Wall Street will be watching this trend closely as the earnings season moves along, as they're looking for profit growth to be driven by sales, rather than cost-cutting and productivity gains. Top-line growth is more important than the bottom line because it's a good barometer of the economy's health.

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Source: Copyright USA TODAY 2013

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