Facebook has 2nd highest revenue growth in S&P 500 Information Technology sector

The Information Technology sector in the S&P 500 was a focus sector for the market this past week, as a number of high profile companies reported earnings for the fourth quarter during this time frame, including Apple, Yahoo!, Facebook, and Google. At this point in time, the Information Technology sector is reporting the 2nd highest revenue growth for the fourth quarter of all ten sectors in the index at 4.5%. Which industries and companies within the sector are reporting the highest growth in sales?

At the industry level, five of the eight industries are reporting revenue growth, led by the Internet Software & Services industry (20.2%). Within the Internet Software & Services industry, Facebook has reported the highest revenue growth at 63%. On Wednesday, the company reported revenue of $2.585 billion for Q4 2013, relative to year-ago actual revenue of $1.585 billion. The Q4 2013 marked the first time that Facebook reported earnings as a constituent in the S&P 500.

It is interesting to note that Facebook has the second highest revenue growth rate in the Information Technology sector as a whole for the quarter. The only company to report higher revenue growth was Micron Technology. However, sales in Q4 2013 for Micron Technology included the acquisition of Elpida, while the year-ago sales in Q4 2012 were stand alone for Micron Technology.

Of the 251 companies in the S&P 500 that have reported earnings to date for the quarter, 74% have reported earnings above estimates. This percentage is above the average of 73% recorded over the past four years. In terms of revenue, 67% of companies have reported sales above estimates. This percentage is above the average of 59% recorded over the past four years. In aggregate, companies are reporting earnings that are 3.6% above the mean EPS estimate. This percentage is below the average of 5.8% over the past four years.

The blended earnings growth rate for the S&P 500 for Q4 2013 is 7.9% this week, above last week’s growth rate of 6.3%. Upside earnings surprises reported by companies in multiple sectors were responsible for the increase in the earnings growth rate during the week. On December 31, the Q4 earnings growth rate for the index was also 6.3%. Six of the ten sectors have witnessed an increase in earnings growth rates since that date, led by the Materials sector.

At the sector level, eight of the ten sectors are reporting a year-over-year increase in earnings for the quarter, led by the Financials (23.7%), Materials (23.4%), Telecom Services (18.1%), and Industrials (16.2%) sectors. The Energy sector has the lowest earnings growth rate (-8.6%). The blended revenue growth rate for the index for Q4 is 0.8%, above the growth rate of 0.3% on December 31.

Corporations and analysts are lowering earnings expectations for Q1 2014. In terms of preannouncements, 44 companies have issued negative EPS guidance for Q1 2014, while 10 companies have issued positive EPS guidance. Analysts have taken down EPS estimates also, as the estimated earnings growth rate for Q1 2014 has dropped to 2.2% today from an expectation of 4.3% on December 31.

During the upcoming week, two Dow 30 and 93 S&P 500 companies are scheduled to report earnings for Q4 2013.