In this video Yvette Roper, Editor of TradingFloor.com interviews Peter Garnry, Equity Strategist, Saxo Bank, about the first quarter earnings reports from benchmark S&P 500 companies, analysing the trends that have emerged and which sectors are the best and worst performers. He highlights the information technology sector, the leader of the pack, and also looks at the lagging materials sector. Furthermore he gives his take on the recently announced Facebook Initial Public Offering which he classes as overpriced while he considers the IT sector as a whole somewhat undervalued.

The surprise factor from the earnings of S&P 500 companies has been 3 percent which is similar to the previous two quarters and according to Peter is good and normal. He sees earnings picking up again in the second quarter stating that growth from now on has to come more and more from sales.

The companies that are doing well are primarily successfully managing costs. They have also been helped by no excessive wage pressure and have so far been sheltered from higher commodity prices squeezing their margins. So all in all it is still a fairly favourable environment for profitability, he concludes.

Peter rates the Facebook IPO as overvalued. Facebook is priced more than double what Google was valued at in 2004 and he doubts whether Facebook’s growth perspectives are twice as good as Google’s. He foresees an IPO scenario not unlike that of LinkedIn’s – where the share price might go up on the first or second day of trading but that it settles thereafter at a lower level and trades flat until investors get more details about the development of growth and sales.

Despite Facebook appearing “pricy” he believes there are good arguments to support that the IT sector as a whole is undervalued. Even though Apple is a main driver some of the other key players like Intel, IBM have seen tremendous results and even Microsoft is also doing well. Valuation is below average for the whole market and based on this there is a lot of value to find in companies within the IT sector, says Peter.

In terms of the laggards in earnings for the first quarter the materials sector appears to have some challenges with mining companies particularly hurt by volatile metal prices in the last six months. Most mining companies however have strong balance sheets and cash flows so Peter finds it generally surprising that the materials sector as a whole has performed so poorly compared to other sectors. He believes however the situation could change by the end of this week after the release of first quarter earnings from key players like BHP-Billiton, Xstrata and Rio Tinto. These three major mining companies could move the aggregate numbers and then things could look somewhat better for the entire sector, says Peter.

See more of Peter's market commentary on TradingFloor.com