Ex­pect Bad News on Wall St

US com­pa­nies ex­pected to post weak re­sults; fi­nal score­board may show a 9% drop in earn­ings

The Economic Times - - Commodities Plus -

Akin Oyedele & Bob Bryan

New York: It looks like the earn­ings growth for Amer­ica’s big­gest com­pa­nies was neg­a­tive in the first quar­ter, com­pared to the same pe­riod a year ago. Busi­ness In­sider is yet to get a con­fir­ma­tion on this. When alu­minum gi­ant Al­coa releases its re­sults on Mon­day, it will mark the un­of­fi­cial start of the heav­i­est re­port­ing sea­son for S&P 500 com­pa­nies. The fi­nal score­board is ex­pected to show a 9.1% earn­ings drop for the quar­ter, ac­cord­ing to Fac­tSet se­nior earn­ings an­a­lyst John But­ters.

But the ac­tual de­cline will likely be smaller, he said. An­a­lysts have ended up be­ing too pes­simistic about most quar­ters since Q2 2013. Still, earn­ings would be ne- gative for a third straight quar­ter. RBC’s Jonathan Golub ex­pects cor­po­rate earn­ings to re­turn to growth in Q2. Earn­ings-per-share growth “has been slow­ing for the past six quar­ters, with cur­rent pro­jec­tions point­ing to a bot­tom in 1Q16,” he wrote in a client note.

How­ever, But­ters cau­tions that weak­ness could per­sist if fac­tors like low com­mod­ity prices and a ris­ing dol­lar do, too.

“Over­all, we’re look­ing for a 2.6% de­cline for Q2 as of April 8,” he said, fore­cast­ing that Q1­would mark the bot­tom.

AN­A­LYSTS TURN BEAR­ISH

Earn­ings ex­pec­ta­tions for S&P 500 com­pa­nies usu­ally tum­ble in the months lead­ing up to the heavy re­port­ing weeks. Earn­ings es­ti­mates dropped 9% year-to-date, more than dou­ble the 4% de­cline typ­i­cally recorded three months be­fore earn­ings sea­son, ac­cord­ing to Bank of Amer­ica Mer­rill Lynch chief equity and quant strate­gist Savita Subra­ma­nian. The de­cline for some sec­tors was “quite re­al­is­tic” be­cause of anx­i­ety af­ter the sell-off that marked the worst-ever start to a year for stocks, ac­cord­ing to an­a­lysts. — Busi­ness In­sider

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