Stock prices, earnings live in different worlds

Q: How do 2nd-quarter corporate profits look?

A: Companies are gearing up to report quarterly profits starting July 8. Investors desperately need justification for the prices they’re paying for stocks.

Aluminum giant Alcoa serves as the unofficial kickoff of profit season — as it’s one of the first companies in the Standard & Poor’s 500 to report. But analysts are warning investors to not expect much from overall corporate profit growth.

Analysts are calling for 4.4% lower profit in the second quarter of 2015 compared with the same year-ago period, S&P Capital IQ says. That means companies would post the first decline in profit growth since the third quarter of 2009.

Energy companies — suffering from oil prices that remain below year-ago levels — are the biggest reason for the expected profit decline. Energy companies are seen reporting 63% lower profit during the second quarter.

Investors, though, continue to price stocks like the corporate profit machine will keep chugging. The market is trading for 16.6 times expected earnings over the next 12 months, which is pricier than the 16-times average over the past 15 years.

It’s still early and companies could still pull out bigger profits than expected. That’s what happened in the first quarter.