The bigger they are, the harder they fall.
At least, that’s the story with 28% of the Barron’s 400 Index components that have reported third-quarter financial results. Large stocks on average were the only size segment that fell short of securities analysts’ earnings forecasts and surprised the least on revenue.
The story is mixed for the other size segments, too. Mid-sized stocks had the smaller of the two average positive earnings surprises, but excelled in exceeding revenue expectations. Small stocks had the reverse situation, topping mid-sized stocks in average earnings surprises but trailing in revenue.
Here is the summary of surprises by size segment in the Barron’s 400, once again using the market-capitalization divisions of the Dow Jones U.S. Total Stock Market Index:
|Large (~> $14 billion||-0.46%||1.61%|
|Mid (~$3.9 to $14 billion||2.33%||4.75%|
|Small (~<$3.9 billion||2.60%||1.75%|
This data is presented with a major caveat. These averages are based on early reports, with the majority of companies yet to announce results. That means the average surprises could change a lot as more reports roll in.
It also means that outsized results can have an extraordinary effect on averages. For example, J.P. Morgan Chase & Co. reported a third-quarter loss of 17 cents a share rather than the expected profit of $1.19. This “disappointment” undoubtedly dragged down the large-stock segment average on earnings.
Just as a reminder, the equally weighted Barron’s 400 Index is comprised of 94 large stocks (23.5%), 100 mid-sized stocks (25%) and 206 small stocks (51.5%).
We’ll see what happens as the earnings-reporting season moves along. At least we have a baseline for the growing accumulation of Barron’s 400 component results.