Corporate earnings season expected to be the worst since 2009

S&P 500 company profits could confirm corporate America has slipped into an earnings recession

Jan 14, 2016 @ 10:35 am

By Bloomberg News

As the fourth-quarter earnings season kicks off this week, results for S&P 500 companies are expected to show a decline in profits for a third quarter in a row, confirming that corporate America has slipped into an earnings recession.

Profits are expected to have dropped by 7.2% in the fourth quarter on a share-weighted basis, according to data compiled by Bloomberg, while revenues are expected to have fallen by 3.1%. This would represent the worst earnings season since the third quarter of 2009. Profits fell by 1.7% in the second quarter last year and by 3.1% in the third quarter.

The main drags on profits have been the slump in crude prices — with earnings for the oil and gas sector seen dropping 73% in the fourth quarter - as well as the sharp rise in the dollar which has hurt exporters, Sam Stovall, U.S. equity strategist at S&P Capital IQ, says.

Profits in the materials sector, home of companies such as DuPont and Newmont Mining, are set to sink 25%. A drop of 4.8% is expected for the information technology sector, of 4.3% for industrials, of 4.8% for financials, and of 2.9% for consumer staples.

The financials sector is particularly prone to disappointments, BNP Paribas strategists say.

Street estimates for the sector have seen minimal revisions despite negative factors including high market volatility and a sharp slowdown in capital markets activity, the strategists write in a note to clients dated Jan. 11.

(Related: What early market volatility means for the year ahead)

S&P Capital IQ's Mr. Stovall says there are also worries about potential ripple effects from the turmoil in U.S. energy sector on the banks.

"Financials face a kitchen-sink quarter, they will probably try to write down whatever they can,” he says.

Beyond the fourth quarter, the earnings picture could improve later this year if the dollar loses steam and if oil prices finally hit a bottom, Mr. Stovall says.

"We could see a V-shape recovery in earnings if the pain from a rising dollar and falling oil prices ease.”

0
Comments

What do you think?

View comments

Recommended for you

Featured video

INTV

Behind the scenes of InvestmentNews' Best Places to Work

Benefits and vacation policies are important for hiring top talent, but giving employees a sense of ownership in decision-making is among the most important qualities, editor Fred Gabriel says.

Latest news & opinion

Why we must create a more diverse and sustainable financial planning profession

CEO explains how, why a firm should commit to conscious inclusion.

Pope Francis wants financial advisers to work like fiduciaries

Vatican bulletin admonishes advisers who act against the best interests of their clients.

Wells Fargo sees slowdown in advisers exiting this year

The 2016 banking scandal and public relations fiasco had alienated some of the firm's advisers.

States trying to save DOL fiduciary rule appeal rejection of effort to intervene

California, New York, Oregon ask for rehearing by full 5th Circuit Court of Appeals.

Employees at best places to work focus on the person — and the fun

Employees at best places to work firms focus on the person and fun.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print