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

Events

3 Questions to ask yourself when making your succession plan

Michael Futterman from Janus Henderson Investors has sage advice for advisers as they approach retirement.

Latest news & opinion

The power of philanthrophy shifts to women, and advisers are taking notice

Philanthropic women are growing in number — and stature.

Cetera brokers may go elsewhere with no stay bonuses on horizon

Some may feel spurned and leave, while others will simply shrug off latest slight and stay.

Fidelity backs away from being 'point in time' fiduciary for 401(k) plans

Some advisers think this indicates other providers will pivot in light of DOL fiduciary rule's death.

Bills to reform adviser regulation, increase sophisticated investors and protect seniors pass House

Measures included in package of 32 bipartisan bills meant to ease rules, spur investment

Genstar Capital buys majority stake in Cetera Financial Group

The private-equity firm has previously invested in such companies as Mercer Advisors and AssetMark.

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