With only a few more days to the end of the quarter the market’s attention will turn to the 3rd quarter earnings reporting season, which traditionally begins with Alcoa’s earnings, due out on October 7.
In what has appeared to be a conundrum, for several months Wall Street has been raising its earnings estimates for the third quarter, at the same time that economists and even the Federal Reserve have been revising their estimates of economic growth down quite dramatically.
While we will have to wait a while to see how those seemingly opposite outlooks actually work out, the third quarter earnings ‘warning’ period is already underway, and seems to be providing clues.
Typically only 20% to 25% of companies pre-announce results, and according to Thomson Reuters, so far 112 of the 500 companies in the S&P 500 have already issued preannouncements. Of those, only 34 have said their Q3 earnings will beat Wall Street’s estimates, while 78 have warned they will not.
That 2.3 to 1 ratio is running considerably more negative than the Q2 earnings warning period when the ratio of positive and negative preannouncements was 1 to 1.