Photo: Brent Schneeman via Flickr
Q3 is coming to a close, and investors are on edge ahead of earnings announcement season. And, rightfully so. July and August were marred by the debt ceiling debacle, the US credit downgrade, diving stock markets, and damaged consumer confidence. September wasn’t much better.However, economic activity didn’t come to a grinding halt, says UBS. They took a close look at 19 companies that announced quarterly earnings since August 1.
The median company beat consensus by 3% on EPS and 2% on revenue. If we compare consensus EPS for the forward quarter (ends Nov.) as of August 25 with the current figure, it fell just 1% for the 15 firms that did not report today. (Estimates will likely rise for most of the 4 firms reporting today.) These revisions reflect guidance as of mid-to-late September and suggest that, while business conditions are tough, demand is not now collapsing as it did in Q4 2008. This is reassuring but no guarantee we will avoid a double-dip.
UBS offers a little more colour on the mixed bag of early earnings announcements:
The most bearish data point: FDX cut guidance on slower imports from Asia. But NKE reported strength in nearly all regions; Europe was flat. Well situated retailers (AZO, BBBY, TIF, WAG) reported solid results. But margins of many consumer companies are squeezed by rising input costs and price-conscious customers (CCL, KR, CAG, GIS). As for financials, credit quality continued to improve at DFS. Well positioned tech companies saw healthy demand (ORCL, ACN, JBL) as did one machinery company (JOYG). The weakest results were reported by firms whose underlying competitive position is challenged (BBY, RIMM).
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