Expect Bad News on Wall St
US companies expected to post weak results; final scoreboard may show a 9% drop in earnings
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