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The bizarre reason why revenue growth will be tiny

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The S&P 500's revenue growth for the fourth quarter is expected to be 1.0 percent, the research company FactSet reports. That might not sound terrible, but if not for a weird quirk in one company's accounting, the expected revenue growth would be more than double that.

The culprit is Prudential. In the fourth quarter of 2012, the insurance giant reported revenue of $46.1 billion, which was almost five times what the insurance giant reported in the fourth quarter of 2011, and amounted to more than half of the company's total revenue for the year.

The revenue surge was due to two "pension risk transfer" transactions, one associated with General Motors and one associated with Verizon. This led to a major increase in revenue in the fourth quarter, but also led to a big boost in "insurance and annuity benefits." Since the benefits were expensed against the increase in revenue, earnings were not impacted like the revenue number was.

But because of the one-time boost, Prudential's revenue in the fourth quarter amounted to a massive 1.7 percent of the entire Q4 revenue for the S&P 500, according to S&P's Howard Silverblatt.

Prudential, then, is expected to show a massive (and misleading) decline in year-over-year revenue in Q4 2013. And that, in turn is dragging down the revenue growth expectation for the entire index. So while the estimated revenue growth rate is 1.0 percent, "if Prudential is excluded, the revenue growth rate improves to 2.2 percent," according to FactSet.

(Read more: Where did earnings go? Profit outlook gets gloomy)

"This is an interesting situation," said John Butters, FactSet senior earnings analyst. While huge one-time charges on the more malleable earnings side are somewhat common, "I haven't seen a situation like this on the revenue side, where you get such a boost in revenues from a one-time event."

So what does this strange situation mean for investors? Should market participants act like analysts are expecting 1.0 percent revenue growth, or 2.2 percent?

"In terms of looking at that number in isolation, it's only part of the puzzle," said Nicholas Colas, chief market strategist at ConvergEx Group. And when it comes to revenue growth, "whether it's 1 percent or 2 percent, all it shows you is that it's really low."

(Read more: Robert Shiller to bulls: 'Don't expect miracles')

Butters noted that even if you exclude Prudential, "you're still looking at a big difference between earnings and revenue," which has been a notable theme all year. But he added that in the fourth-quarter numbers, at least, "Prudential is a big contributor" to that disparity.


—By CNBC's Alex Rosenberg. Follow him on Twitter: @C NBCAlex.

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This story has been updated to reflect the reasons behind Prudential's increase in revenue.

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