Vital Signs: Earnings Winners and Losers
On cover: principal indicators, home prices, home sales, durable goods orders, and a ton of income reports
by dint of. James Cooper
The second-quarter earnings season kicks into pre-eminent gear this week, by 159 S&P 500 companies stud to report. By the end of the week, half of the S&P 500 will have posted their results, offering a good idea of how the winners and losers are stacking up. For now, with only a scant 33 companies having reported, Thomson Reuters says earnings are expected to have existence down 14.7%, which would be the fourth consecutive quarter of negative growth.
The expected sector breakdown isn’t hard to figure. Energy and technology, currently projected to show gains of 28% and 16%, particularly, force of will lead the winners. The biggest loser will be financials, expected to postman a whopping 72% earnings degeneracy, similar to their first-quarter losses. The consumer discretionary sector, is projected to subsist down 20%, led by lots of red ink from auto makers. Homebuilders will actually be something of a more for the sector, in that their second-quarter losses are expected to be half the size of those in the second quarter of 2007.
The week will offer adequate supply of news relevant to both monetary companies and homebuilders. Given that falling home prices lie at the heart of the current dysfunction in the credit markets, Wall Street will be watching the Office of Federal Housing Enterprise Oversight’s abode estimation index for May for any sign that the drop in home prices is either slowing from a high to a low position or still picking up steam. The week also offers reports on sales of new and existing homes. Both have shown some signs of stabilizing in recent months, but inventories are restrain high, and pledge rates have backed up, eating into affordability.
One interesting item of second-quarter earnings is that profits outside of finance are expected to hold up surprisingly considerably. Thomson Reuters says analysts project earnings, excluding the financials sector, to be up 8.3%, and even further omitting a big boost from the energy sector, the projection is still 2.9%. That’s clearly a modest performance, still it’s far from the broad profits. douse typically seen in a recession. Right at present, earnings guidance from the S&P 500 companies shows a 1.9-to-1 ratio of negative to positive earnings pre-announcements. That’s below the 2.3-to-1 ratio this time last quarter, and it’s also less than the long-term mean proportion of 2.1-to-1.
The second half is shaping to be in addition challenging since companies outside finance. Unexpectedly high gasoline and fuel prices are robbing the buying power of consumer incomes and negating the stimulus from the put a tax upon rebates. Plus, the latest open of financial upheaval implies the credit crunch is getting worse, especially for would-be homebuyers. Despite the Fed’s rate cuts, fixed mortgage rates are up more than a half point since April. And growth overseas, a severe prop under economic progress and profits, is showing clear signs of slowing. As the pace of profits. reports picks up this week and next, investors will be increasingly focused on guidance for the third quarter and full-year 2008.
Here’s the weekly economic list from Action Economics.
Top Economic Reports
Reports
Date
Time
For
Median Estimate
Last Period
Leading Indicators Index
Monday, July 21
10:00 a.m.
June
-0.1%
-0.1%
Existing Home Sales (millions)
Thursday, July 24
10:00 a.m.
June
4.930
4.909
Durable Goods Orders
Friday, July 25
8:30 a.m.
June
0.1%
0.1%
New Home Sales (millions)
Friday, July 25
10:00 a.m.
June
0.508
0.506
Consumer Sentiment Index (decisive)
Friday, July 25
9:55 a.m..
July
55.0
55.1
Original paragraph: http://www.businessweek.com/investor/content/jul2008/pi20080717_023861.htm?campaign_id=rss_null
