GRIM REMINDERS OF 2009
It seems the 2009 crisis has returned to haunt the US corporate sector even though the market seems to be happily rallying with the Dow breaking above the 13000 mark.
Based on the 291 companies in the Standard & Poor's 500 that have reported earnings so far — along with estimates for the rest — S&P Capital IQ expects overall profits to decline by 0.5% from the same period a year ago. That would be the first time that profits have shrunk since the third quarter of 2009, just after the Great Recession. Analysts are predicting that earnings will shrink 0.3 percent for the third quarter, too. Revenue for those 291 companies has increased just 2.3 percent, compared with a 10-year average of 7.1 percent, according to S&P Capital IQ. Worse, companies are getting more pessimistic about the rest of the year.
EARNINGS FORECAST CUT
Among the largecaps UPS, Cisco and DuPont have already trimmed down 2012 earnings forecast and cited caution that there could be a case for further guidance cuts. In a survey by data provider FactSet, 47 out of 60 companies lowered the earnings guidance they gave investors for the third quarter. And investors often trade more on outlooks than on the last quarter's results. Shares of online game-maker Zynga plummeted nearly 40 percent on Thursday after it slashed its profit guidance for the year to between 4 cents and 9 cents per share, from 23 cents to 29 cents previously. UPS lost 5 percent of its value the day after cutting its full-year earnings forecast by 25 cents per share, to a range of $4.50 to $4.70. Its stock regained some of that loss later in the week. Starbucks shares plummeted 9.4 percent on Friday after it cut its outlook for the current quarter and said it is still struggling in Europe.
It seems the 2009 crisis has returned to haunt the US corporate sector even though the market seems to be happily rallying with the Dow breaking above the 13000 mark.
Based on the 291 companies in the Standard & Poor's 500 that have reported earnings so far — along with estimates for the rest — S&P Capital IQ expects overall profits to decline by 0.5% from the same period a year ago. That would be the first time that profits have shrunk since the third quarter of 2009, just after the Great Recession. Analysts are predicting that earnings will shrink 0.3 percent for the third quarter, too. Revenue for those 291 companies has increased just 2.3 percent, compared with a 10-year average of 7.1 percent, according to S&P Capital IQ. Worse, companies are getting more pessimistic about the rest of the year.
EARNINGS FORECAST CUT
Among the largecaps UPS, Cisco and DuPont have already trimmed down 2012 earnings forecast and cited caution that there could be a case for further guidance cuts. In a survey by data provider FactSet, 47 out of 60 companies lowered the earnings guidance they gave investors for the third quarter. And investors often trade more on outlooks than on the last quarter's results. Shares of online game-maker Zynga plummeted nearly 40 percent on Thursday after it slashed its profit guidance for the year to between 4 cents and 9 cents per share, from 23 cents to 29 cents previously. UPS lost 5 percent of its value the day after cutting its full-year earnings forecast by 25 cents per share, to a range of $4.50 to $4.70. Its stock regained some of that loss later in the week. Starbucks shares plummeted 9.4 percent on Friday after it cut its outlook for the current quarter and said it is still struggling in Europe.
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