With over 50% of companies earnings reported so far, earnings appear about 35% lower (of the S&P 500 included stocks) than last year’s same period. At the beginning of the year, analyst only expected 12.5% lower. Even with earnings so much lower than forecasted at the beginning of the year, expectations where reduced so dramatically over the quarter that that over two thirds of earnings have exceeded estimates so far.
Healthcare seems to have held off the impact of the recession with a 2.2% average growth over last year. Consumer discretionary companies have felt the most dramatic effect with an average earnings decline of 96.8% over last year. Interesting though how the Healthcare Sector Spider ETF (XLV) is down -8.66% this year and the Consumer Discretionary Sector Spider ETF (XLY) is up 5.27% for the year.
Although expectations where clearly lowered in the first quarter, the second quarter remains largely unchanged. Earnings are expected to be down 20% year over year in the second quarter and just a 4% drop in the third.
Wall Street seems to be either too pessimistic or overly optimistic. So the question is whether the future estimates are overly optimistic of too pessimistic? If Wall Street is ends up being too optimistic then we will likely retest the lows of early March 2009. If Wall Street turns out to be too pessimistic then we may have more to gain. The question is do you think earnings next quarter only declined 20% over last year’s same period?
