More than half of the Barron’s 400 Index companies have reported fourth quarter results, and we are pleased to report they did better than expected.
The 217 that have reported through Feb. 7 delivered per-share earnings that averaged 8% above estimates and revenue that on average was 4% better than forecast. Fully 70% of the reporting companies had earnings surprises (which averaged 16%) and 68% had revenue surprises (averaging 8%). Almost 28% turned in earnings disappointments (averaging 11% below expectations), while nearly 31% fell short on revenue by an average of 4%
Compared to the same quarter a year earlier, the Barron’s 400 companies are shining stars. Their per-share earnings averaged a 33% gain over the year-before period, and their average revenue increase was more than 11.5%.
Much more differentiation shows up in the sector perspective, starting with the portion of Barron’s 400 components that have reported—a range of 33% to 74%. Here is a summary of surprises by sector:
Financials and technology are the true leaders in both earnings and revenue. The per-share earnings surprises for consumer discretionary and materials were bloated by one company each with supersized increases. That, along with less-than-half reporting percentages, indicates these surprises will be trimmed substantially as more reports come in.
Still, there is much to like at this halfway point in tallying the fourth quarter. Investors can’t bring themselves to love the slow-but-steady economic recovery. They either get over-enthusiastic, as the stock market of 2013 showed, or easily panicked, as the market is demonstrating this year. As the economy continues to strengthen, however, the financially strong companies of the Barron’s 400 will make the most of the opportunity.