Analysts In Imaginationland: Q4 Earnings To Be Highest Ever!

Hope springs eternal. Wall Street expects S&P 500 companies to report operating earnings of $24.61 per unit in Q4. That would smash the previous record, $24.06, set in Q2 2007. It would also be up 62% year over year, a bit of an acceleration from this quarter’s -29%. Think analysts have some expectations to revise?

Still Dreaming of V-Shaped Recovery: S&P500 EPS Growth Y/Y

Q307A: -9%
Q407A: -31%
Q108A: -26%
Q208E: -29% (96% of companies have reported)
Q308E: +4%
Q408E: +62%
Q109E: +50%

As a glance at the last recession shows (see below), profits don’t recover this way. Even if analysts are right that earnings will grow in Q3 (highly unlikely), the forecasts for Q4 and early 2009 are absurd.

S&P 500 EPS Trend During Last Recession (Y/Y Change)

Q300: 9%
Q400: -5%
Q101: -23%
Q201: -39%
Q301: -35%
Q401: -24%
Q102: 1%
Q202: 29%
Q302: 27%
Q402: 20%
Q103: 15%
Q203: 11%

Merrill economist David Rosenberg notes that the current S&P500 estimate for 2009 is $105. He expects earnings to be about $50. Hard to see the market recovering in the face of that.

See Also:
OK, Bulls: analyse This
Why Stock Market Still Screwed: Analysts Still See V-Shaped Recovery


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