Monday, August 16, 2010

What did this Earnings Season mean in the Banks?

For the most part, the major indexes climbed a wall of positive earnings reports until last week. Lately, it does not take much to make things turn south and push everyone to the exits. With the VIX in the mid-20's this is understandable but I would like to see additional reasons.

In Aqumin's AlphaVision Landscape I created a MultiView of two different sets of data on the same underliers, namely the Banks in the S&P 500 that have reported since July 1st. The view on the left has Net Income Surprise as Height and Color. I have Regions Financial (RF) selected because it had the best performance of the Banks over the last month (those are the names in the lower left hand corner). The big green buildings are showing Net Income at least 10% above analyst expectations.

Banks-Sales and Net Income Resized

On the right side, you are looking at Sales Surprises with big green buildings 10% above analysts' expectations as well. While there are some positive results there is a lot more red in the landscape and not near the upside. Simply put, the Sales Surprises were not as good as the Net Income Surprises. The top line in the Banks was not giving everyone the happy feelings they were looking for. Right now the market is looking for "fantastic" to help counteract the multitude of new worries that seem to perk up every week. Slow Sales growth for Banks means they are not really lending. No bulls like that. On to next earnings season.

Andrew Giovinazzi

The opinions expressed by the author are his alone, and do not reflect the opinions of Aqumin LLC, its shareholders, partners or affiliates.