From Citi’s Tobias Levkovich, a reason not to jump off a bridge just yet:
Pre-announcement trends have picked up modestly (see Figure 2) but no surge is being recorded as was the case in more extreme environments in the past 15 years, implying that conditions are not as bad this go round despite extended margins. Indeed, we have received loads of questions from clients on this front of late with fears of another earnings collapse being possible, with one client wondering about a 50% plunge in EPS next year. Fascinatingly, that would be the worst on record following World War II (see Figure 4) and would even trump the Great Recession numbers posted in 2007-09; thus, we find that scenario to be less than likely though certainly inflammatory. One can never rule out any outcome but it would appear to be a very low probability outcome.
This sanguine view is consistent with what other analysts have observed, which is that there aren’t too many big red flags for the imminent earnings season.
What companies observe about Q4, and 2012, however, is a different story.