Today is the “unofficial” start to earnings season, as major aluminium player Alcoa will report after the bell.
Obviously, the question on everyone’s mind is: How bad has it gotten?
Expectations are very low.
BTIG’s Dan Greenhaus excellently sets the stage:
Get ready for the end of record corporate profits says the Associated Press while Reuters is noting that the corporate outlook is the most negative in roughly four years. What we’ve seen from companies that have either already reported or warned is commentary concerning Europe and its knock-on effects here in the U.S. (APKT is the latest citing weakness primarily in North America). Taking recent developments into consideration, analysts have been taking down earnings expectations for some time now and heading into this week, the first for S&P earnings, the expected YOY earnings growth rate is actually negative.
There is no denying Europe’s importance to the S&P 500. The region accounts for roughly 15-20% of earnings although it must be noted that not every overseas sale is recorded in a foreign currency. Nonetheless, the slowdown is hitting earnings across sectors; energy is expected to fall by nearly 20%, no surprise given the near 20% drop in oil prices during the second quarter. Materials and financials are also expected to have a tough time while we’ll be watching discretionary quite closely given the performance of a number of names during the quarter.
Meanwhile, you might find this table from S&P Capital IQ to be interesting, as it breaks down the leaders and laggards by sector in the market. Consumer Discretionary is having a fantastic year, while energy is getting crushed. Tech is also having a great year, with the sector up 14.2%.
Photo: S&P Capital IQ