Earnings: A Bearish Indicator for S&P ?

“I’m not being purposely bearish. I view it as almost a public service.”

-David Rosenberg, Gluskin Sheff


To date, 73% of Standard & Poor’s 500 companies reporting have beat Q2 earnings estimates. But as Robin Blumenthal points out this morning, “you would do well to ask: Which estimates?”

Robin references David Rosenberg’s commentary on the subject. Rosie says the good showing is a function of when the estimates were made. His estimates for Q2 earnings/share is $13.94 —  30% below what analysts consensus at the end of 2008.

December 2008 estimates for Q2 earnings were $19.92 — they were repeatedly sliced until they had fallen down to $14.15 as Q2 ended.  While everyone seems to be excited about these beats, they are actually massive misses to the consensus just 2Qs ago. Year over year, earnings are down about 27% for Q2.

As to Q3 estimates — they are now down more than 30% to $14.57.

Given the market’s lofty levels, don’t expect the same celebration for beats of these reduced earnings . . .


Predicting a Grizzly Quarter
Barron’s, 9/5/09

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