Hear that? That’s the sound of earnings being chopped. According to Bloomberg, earnings estimates for the S&P500 have just been cut for the first time this year. This means that a long streak of earnings upgrades has come to an end.
Estimates for S&P 500 companies’ combined 2011 profit fell as low as $95.17 last month from an August high of $96.16 and posted the first quarterly reduction since the three months ended June 2009, according to more than 8,500 analyst forecasts tracked by Bloomberg.
In addition, the percentage of stocks experiencing an earnings upgrade has also just declined, as shown by the chart below using Citi and Fact Set data. Just 51.8% of earnings changes were positive during September. Given Bloomberg’s report of a falling overall S&P500 earnings forecast, the average downgrade is likely larger than the average upgrade.
Energy is faring the worst, while oddly Consumer Discretionary is experiencing the highest proportion of earnings upgrades This emphasise the peculiar situation whereby the companies doing best are the ones which make things people don’t need >