We’re still very early in the earnings season, but another quarter of fairly weak earnings appears to be in the works (via Zacks):
“Total earnings for these 22 companies are up +1.4% from the same period last year, with total revenues up +3.5%. This is better performance than what this same cohort of 22 companies did in the third quarter when total earnings were down -2.4% from the year-earlier period.
At this stage, the important story on the earnings front is what’s expected for the more than 95% that have still to report results. And those expectations have been steadily coming down over the last three months and are barely in positive territory now. Total earnings in the fourth quarter are expected to be up +0.4% from the same period last year. This is a sharp drop from the roughly +7% earnings growth rate that consensus expected just three months ago.
The downward adjustment to expectations notwithstanding, fourth quarter earnings growth is still better than what was expected in the third quarter just before the start of that reporting cycle. At this stage in the third quarter, total earnings were expected to be down more than -3% from the same period last year.
Actual results, however, came out a little better with total third quarter earnings essentially flat. Excluding Finance, total earnings in the third quarter were down -4.1%, while total ex-Finance revenues are expected to be down -1.3% in the fourth quarter.”
Cullen Roche
Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.
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Tom Brown
It is important to consider both the quality and quantity of earnings. http://goo.gl/WgV2W
Hussman has a chart in this weeks letter .
It charts corp profits after tax as a % of GDP. This is presently at the high extreme.
Also on the chart is the subsequent 4 year annual profit growth based on the above %GDP.
Based on the chart he provides, it looks like a 4 year subsequent annual profit of Approx -10-11% ( I am not sure if this means -10% each year for 4 years of if by the forth year it will be at -10%)
I guess ,given the declining earnings mentioned in this post, this will likely lead to declining after tax corp profits and this chart could give a picture of where profits are moving if there is still a mean reversion world.
Cullen how’s ur earnings expectation ratio looking?
per the DailyUpdate tax receipts were WAY up in December – which doesn’t mesh with what everyone and everywhere else is saying
At the same time as the estimates have been adjusted downwards the stock market has been on the move upwards. Muliples are on the move!