Prepare to see the worst corporate earnings in over fifty years, warns
Barron's Jacqueline Doherty, and get ready to wait until the second half of 2009 for an earnings recovery.
Analysts believe corporate earnings will fall 15.5% in Q1 2009 vs. Q1 2008, and will fall 14.3% in Q2 Y/Y. If the analysts are correct, that would bring the total earnings decline to 35% since the profit peak of mid-2007, nearly twice the average peak-to-trough fall of 18%.
Early Q4 earnings reports failed to inspire: JPMorgan (
JPM) would have posted an operating loss if not for recently acquired WaMu, Alcoa (
AA) lost $1.19B, Intel's (
INTC) Q4 profit dropped 90%, and Nvidia (
NVDA) and Liz Claiborne (
LIZ) both warned investors of bigger-than-forecast losses.
Sectors that could see major losses include materials (-71% consensus), consumer-discretionary companies (-60% consensus), tech firms (-19% consensus) and industrial and energy companies (-21% consensus).
Bottom-up analysts may not have cut their earnings estimates far enough yet. They expect the S&P 500 to post combined earnings of $74.10/share this year vs. top-down analysts who expect just $62.73.
The good news is that the decline has to stop sometime. Analysts see a levelling off in Q3 followed by a 37% jump in Q4. Note, though, that the improvement is based on comparing earnings to a horrid 2008 and not a recovered economy. Even so, stocks have to recover sometime and could get a decent boost during the summer.
http://seekingalpha.com/article/1152...nings-barron-s