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B400 Companies Are Posting Solid Earnings and Revenue Surprises

John A. PrestboJohn A. Prestbo

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:

Average Surprise
Reported EPS Revenue
Consumer Discretionary 40% 18.39% 1.36%
Consumer Staples 48% 3.16% -0.72%
Energy 33% 4.90% 1.40%
Financials 74% 4.15% 8.58%
Health Care 55% 3.87% 2.58%
Industrials 56% 0.19% -0.65%
Materials 41% 11.95% 1.29%
Technology 71% 4.32% 8.91%
Utilities 0%

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.

John Prestbo, senior advisor to MarketGrader Capital, was formerly editor and executive director of Dow Jones Indexes. He was also chairman of the Dow Jones Index Oversight Committee. During his time at Dow Jones Indexes he worked, along with Barron's and MarketGrader, on the development of the Barron's 400 Index. Prior to that, Mr. Prestbo worked as an editor and writer for The Wall Street Journal in various capacities, including page-one editor, commodity news editor and markets editor. Mr. Prestbo has co-authored or edited several books over the past 30 years. The most recent was "The Market's Measure: An Illustrated History of America Told Through the Dow Jones Industrial Average," published by Dow Jones Indexes in 1999 and "Barron's Guide to Making Investment Decisions" which he helped to compile and edit in 2006. Mr. Prestbo won the University of Missouri Award for Distinguished Business Writing in 1967 and the George M. Loeb Achievement Award for Business Writing in 1968. In 2007, he won the William F. Sharpe Indexing Lifetime Achievement Award. That same year, he was honored for his leadership by Dow Jones Indexes during its celebration of 10 years as a separate business unit.

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  • Allen Butler
    Posted on

    Allen Butler Allen Butler


    At some point, please comment on BFOR’s volume, liquidity, and the bid/ask spread. It also seems that the price does not track the index as closely as it might.