Dismal earnings season in the offing

Just a few weeks now ’til first quarter earnings seasons kicks off on April 10. S&P is forecasting full-year earnings growth of 5% in 2012 for a record $105 a share for the S&P 500 companies. But after a remarkable 28% rebound over the past 5 months in US stock prices, valuations seem truly primed for perfection notwithstanding an economic backdrop of slowing global growth. For those who forget, we are coming off last quarter where a low 63% of S&P 500 companies beat earnings estimates in Q4 2011 (a “normal” beat rate is well above 70%). And the Q4 beat rate would have been more like 55% if not for the star power of blowout quarters from Apple and Caterpillar.

Over the past few weeks, companies themselves have been trying to prepare shareholders for a letdown, with negative pre-announcements now at their highest level since the March 2009 market lows. So far it seems at least six of the 10 S&P 500 sectors are likely to see earnings declines in Q1.

Meanwhile money continues to pour out of domestic stock-based mutual funds, with another $2.84 billion leaving last week, according to the Investment Company Institute. See: Market’s Next Big Worry.

Maybe Muppets are not so plentiful as Wall Street assumes after all.

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One Response to Dismal earnings season in the offing

  1. stone merchant says:

    Well, count me as one proud (and extremely defensive) MUPPET! And this MUPPET is very, very heavy into green cash at the moment. The actions of the leading stocks are starting to exhibit an unsettling wobble, esp AAPL. The first of those 260 hedge funds, and the pension funds, and the mutual funds might just be deciding to do a Jerry McGuire: SHOW ME THE MONEY! And like mentor Bill Oneil told me, when you get all 10 turkeys under the box, pull the string and catch em all! No sense in watching turkey after turkey wander out when they realize there is no more corn.

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