>Earnings Surprise by Country / Sector Breakdown for 2011 Q4

Earnings, Sales and Implied Margin Surprises


■ 4Q Reporting Season Review — In this review, we look at both the Top Line (Revenue) and the Bottom (Earnings). To date, 54.5% of Asian companies have beaten sales estimates with 40.4% beating earnings estimates. Despite more companies beating sales estimates than not, the aggregate surprise was negative US$19.6 billion.


■ Implied Margin Surprise — Given Top and Bottom Line surprises we can compute the Margin surprise. Missing sales but beating earnings is a positive margin surprise, while beating sales yet missing earnings is a negative surprise. Negative margin surprises in Asia outnumbered positive surprises 2:1, indicating Asia still has less pricing power.


■ Country/Sector Earnings Hits/Misses — China and Korea have a larger proportion of negative earnings surprises relative to other markets. In aggregate, they reported over USD2bn less than expected. Healthcare, IT and Materials disappointed while Consumer Staples and Financials did relatively better.


■ Pre-announcement drift — Pre-announcement spread of Quintile 1 - Quintile 5 was approximately -1.9%, 10 trading days before reporting date. Seven days postannouncement, the spread is approximately 3.8%.


■ Country/Sector Margin Misses — Countries and sectors with high implied negative to positive margin ratio include Indonesia, Taiwan, South Korea, Telecoms and Utilities.


To read full report: Q4 2011 EARNINGS REVIEW
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