Earnings Forecasts

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The Financial Times – US corporates shy to offer guidance
US companies are more uncertain about the future than at any point since the financial crisis, with just one in five of the country’s biggest corporations making any predictions as they published fourth-quarter results. “We’re seeing a marked reluctance from companies to be concrete in their forecasts,” said Christine Short at data provider Standard & Poor’s Capital IQ. “When companies have talked about prospects for 2012, they have tended to make generic comments, which could apply to any company in any sector.” Some 410 companies in the S&P 500 index have reported results so far and just 86 of them offered an earnings per share forecast for the first quarter of 2012. That is on track to be the lowest number since the third quarter of 2009, when companies were still weighing up the impact of the financial crisis.

The chart above is consistent with the story above.  The latest plot (in red) is the lowest level since August 2009 and guidance is still in a downtrend.

MarketBeat (WSJ Blog) – Earnings Prepped To Fall Off A Cliff
As stocks keep rallying, investors appear to be ignoring some of the major warning signals coming from corporate profit forecasts. The major themes of this quarterly earnings season have been well documented. Earnings growth has come off record highs and the corporate profit landscape looks strikingly different when Apple gets stripped from the equation. Negative guidance has also outweighed positive outlooks, a development that doesn’t seem to be garnering much attention. With earnings season close to complete, 86 companies in the S&P 500 have issued guidance for the current quarter. Of those forecasts, 54 have been negative, 26 are positive and 6 are in-line, which translates to a 2.1 negative-to-positive ratio, according to S&P Capital IQ. While the current ratio is below last quarter’s 2.5 level, it’s still above the readings posted in last year’s second and third quarters. Moreover, analysts are expecting earnings growth in the current quarter to diminish significantly. Estimated profit growth for the first quarter sits at just 1.2%, S&P Capital IQ data show. Next quarter isn’t expected to be much better, up 1.9%.

The chart below comes from Bloomberg data (detailed last week) and shows Q1 2012 earnings forecasts versus Q1 2011.  It is now negative for the first time.  A little more than six months ago analysts were forecasting earnings growth near 13%.

Cut this earnings season anyway you want, it is not that good.

Source: Bianco Research

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