Earnings season unofficially kicks off next week when aluminium giant Alcoa announces its second quarter financial results.Analysts and investors are anxiously waiting to hear what companies will be say about prospects in light of the uncertain and fragile economy.
However, 22 of the S&P 500 companies with second quarters ending in May have already published their Q2 results.
“Over half of these companies beat estimates and said that business was stable and that they are yet to see negative spillovers from Europe, but macro uncertainty remains,” said David Bianco, Deusche Bank’s Chief U.S. Equity Strategist.
Given this pattern, Bianco thinks that most of the companies that have yet to announce earnings will likely repeat what was said in Oracle’s recent earnings announcement. From Bianco’s note:
Companies will likely sandbag 2H guidance on macro concerns
We believe most companies will echo Oracle CFO’s comments “I do read the same newspapers you all do and do keep up with the news of the economy. So I have tried to keep that in mind in my guidance regardless of our achievements in the quarter” and will give guidance which will likely prove to be too conservative. Out of the 15 companies that have updated guidance so far, 13 reduced guidance to below analyst estimates primarily due to FX.
Bianco is one of the more bullish strategists on the street. He sees the S&P 500 ending the year at 1,475 on earnings of $105. His 12-month target for the index is 1,500.