The S&P 500 (INDEXSP:.INX) has fallen for nearly two straight weeks, even though companies on the index have been beating consensus 4Q EPS growth estimates by a fair margin. The trick is that analysts have been revising pre-announcement estimates down at an unprecedented rate, lowering the bar for positive surprise almost across the board.
“Of the 232 S&P 500 companies that reported 4Q13 earnings through January 30, 167 beat estimates and 38 missed, leaving a 4Q13 ratio of positive to negative surprise of 4.39x versus a 3Q13 ratio of 4.03x, and 4Q12 ratio of 3.16x thus far into the earnings reporting season,” writes Citi analyst Tobias Levkovich. “However, the awful pre-announcement trend left lowered expectations going into the releases.”
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