Category: Corporate Revenues

As I have previously commented upon, one of the problematic aspects of today’s business environment is the continuing “lagging” nature of corporate revenue growth.

The August 2 FactSet Earnings Insight report comments upon 2nd half projected S&P500 revenue growth.  Here is an excerpt, under the heading “Earnings Growth Rebound Still Projected for 2nd Half 2013, But Little Revenue Growth” :

However, estimated revenue growth rates for both Q3 2013 (2.8%) and Q4 2013 (0.7%) are expected to be below estimated earnings growth rates, particularly for Q4 2013. No sector is expected to see double-digit revenue growth in either quarter.

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The Wall Street Journal published an article on July 15, titled “Tame Inflation Also Has Some Drawbacks,” that discusses various aspects of low inflation and its impact, including companies’ ability to raise prices and other aspects impacting corporate earnings and revenues.

An excerpt from the article :

While tame prices avoid spooking the Fed, freeing it to consider factors such as unemployment, they may be too subdued. Rising prices boost companies’ top lines and, ultimately, profits. That is needed to underpin stock gains. With margins already well above average, corporate revenue must start pulling its weight. As earnings season gets under way in earnest this week, it seems possible, though, that year-over-year revenue will be about flat. This would mark the third-consecutive quarter of ennui.

Nicholas Colas, chief market strategist at ConvergEx Group, dubs this a “revenue recession.”

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The FactSet Earnings Insight report of July 12 contained two charts depicting S&P500 revenues from a long-term perspective.

For reference purposes, below are the two charts depicting S&P500 sales.

The first chart depicts S&P500 annual revenues (and future estimates) on a Sales Per Share (SPS) basis since the year 2000, as depicted:

Calendar Year Bottom-Up SPS Actuals & Estimates

The second charts depicts S&P500 quarterly revenues (and future estimates), since Q4 2010, on a Sales Per Share (SPS) basis, as depicted:

Quarterly Bottom-Up SPS Actuals & Estimates

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The “lagging” nature of corporate revenue growth is a continuing characteristic of today’s business environment.

This topic has been addressed in a variety of posts and other writings, most recently in the April 29 StratX, LLC post titled “Corporate Revenues Under Pressure.”

Of note, one can see this low overall rate of revenue growth reflected in a variety of 1Q2013 operating results.  For instance, one can see that 1Q2013 revenue growth for the S&P500 Industrials Sector is expected to be .3%, according to Thomson Reuters’ “This Week In Earnings” of May 24.

There are also some notable statistics in the FactSet Earnings Insight of May 17, regarding both 1st quarter and 2nd half S&P500 revenue growth.

One excerpt regarding 1st quarter revenues:

In aggregate, companies are reporting sales that are .1% above expectations.  Over the previous four quarters on average, actual sales have exceeded estimates by .7%.

Another excerpt pertaining to 2nd half 2013 revenues:

However, estimated revenue growth rates for both Q3 2013 (3.4%) and Q4 2013 (1.9%) are expected to be well below estimated earnings growth rates. No sector is expected to see double-digit revenue growth in either quarter.

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StratX, LLC offers the above commentary for informational purposes only, and does not necessarily agree with the views expressed by these outside parties.