Q1 So Far – Some Tears, Some Laughter, No Real Conviction

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  • 80 of the 132 companies that comprise our industry group indices have reported earnings for the first calendar quarter of 2012.  On average we have seen positive surprises (67 companies), but at the same time we have seen negative near-term revisions (34 companies).  Caution around demand outside the US is broadly evident – the group that has reported has underperformed – though only slightly – since reporting.
  • However, results are very mixed with negative surprises as well as positive in every sector except Packaging – which has underperformed anyway.  Conglomerates, Capital Goods and Electrical Equipment have had the biggest upside surprises; Paper the smallest.
  • Performance has for the most part tracked either the surprise or the guidance, with very few incidences of investors looking through the numbers and ignoring the near-term noise.  Relative performance has for the most part been directional but not volatile and as a consequence we do not see any moves that would cause us to change our overall stance of caution towards the Paper space and interest in Metals and Mining.
  • We have had only one report in the commodity chemicals space.  This confirmed our view that March was a disproportionally large part of the first quarter and that the outlook for Q2 mirrors March, but surprised negatively on how very poor Europe was relative to the US.

Exhibit 1

Industrials and Basics: Q1 2012 So Far – 80 Companies
Average EPS Surprise (%) Performance Since Release S&P Performance Since Release Rel Performance #Revisions Per Company, Post Earnings % Change Next Q EPS Est Since Release
Cap Goods 10 2.2% 1.9% 0.3% 8.50 2.7%
Chemicals 7 2.1% 1.4% 0.7% 6.63 2.4%
Conglomerates 17 4.5% 2.0% 2.5% 7.29 1.3%
E&C 6 0.9% 0.6% 0.4% 5.33 -1.7%
Electrical Equipment 11 0.6% 1.2% -0.6% 3.25 -3.7%
Metals 7 -0.2% 1.5% -1.7% 5.91 -9.3%
Packaging 7 0.5% 1.7% -1.2% 3.25 -7.6%
Paper 7 -1.1% 1.5% -2.6% 3.25 -4.8%
Total Averages 11 1.5% 1.6% -0.1% 6.25 -1.1%

Source: Capital IQ and SSR Analysis – Performance is Since Reporting

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