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4 August 2017
Americas/United States
Equity Research
Strategy
2Q17 SMID EPS Report Card
STRATEGYResearch AnalystsLori Calvasina
212 538 6396
lori.calvasina@credit-suisse
Sara Mahaffy, CFA
212 325 6824
sara.mahaffy@credit-suisse
Small Cap Continues To Lag Mid & Large On
Earnings; Weak Trends In Small/Mid Energy,
Better Trends For Small/Mid Financials
Roughly halfway through small & mid cap reporting season - trends
for small caps coming in weaker than mid or large.
As of August 2nd,
61% of Russell Mid Cap companies and 44% of Russell 2000 companies
had reported results (vs. 71% for the S&P 500). We view reporting season
as solid for mid cap companies so far, as the percent beating on EPS
(74%) is above last quarter and at the high end of its range, and the
percent beating on sales (65%) is in line with last quarter and at the high
end of its range. Trends have been a bit less robust for small caps, with the
EPS beat rate (61%) and sales beat rate (58%) coming in similar to last
quarter and closer to its LT average. The theme of strength in mid and
large relative to small is one that runs through many earnings related
trends that we monitor and was also seen in the 1Q17 reporting season.
We think this it is at least partially explained by the more positive impact of
a weaker Dollar on mid and large caps, which have higher international
exposure than small caps.
Whoˉs left to hear from
The coming week will be another heavy earnings
week in the small cap space. The companies left to report in small and mid
cap will be heavily dominated by Consumer (especially Specialty Retail),
Health Care (especially Biotech), Industrials, and Tech.
Sales beats & revisions continue to favor high intˉl exposure over
pure domestic exposure.
On an all cap basis, 70% of companies with
high intˉl exposure and 59% of companies with domestic exposure have
beaten consensus sales estimates, both in line with last reporting season.
This gap has been unusually wide recently. On earnings revisions, trends
have also been stronger for stocks with high intˉl exposure than those with
domestic exposure in recent months, with the rate of upward revisions
surging to 60% for companies with high intˉl exposure, and the rate stalling
at 49% for companies with domestic exposure. For the other main theme
we monitor ¨C cyclicals vs. defensives ¨C small & mid cap cyclicals still
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