Tahoe-Truckee Market Beat: Fourth quarter earnings forecasts for the S&P
January 12, 2016
Fourth quarter earnings reporting is just getting going. Alcoa Aluminum kicked off the earnings reporting season on Monday; traditionally they are the first company to report.
Even though Alcoa's report is considered to start the season, actually, 21 companies have already reported. Nineteen more companies will report this week. Other S&P companies will be reporting over the next few weeks. Earnings are the main driver of stock prices.
According to data from FactSet, corporate earnings are projected to drop by -5.3% for the fourth quarter. If they do decline again, it will the first time we've seen three consecutive quarters of negative earnings growth since 2009.
Telecom is forecast to have the strongest earnings growth of the 10 S&P sectors with a rate of +27.1 %. AT&T should contribute the most to the Telecom sector's earnings growth, without AT&T earnings growth for Telecom would only be +19.8%.
Financials should be the next best sector with a rate of +6.7%. The Financial sector will be lead by the Banks industry with a +21% growth rate.
The largest decline will be from the Energy sector with a drop of minus -67.7% — in fact if you were to exclude the Energy sector, earnings growth for the entire S&P 500 would be flat at 0.0% instead of dropping -5.3%.
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Materials should be the next worst performing sector with a -25.9% drop. The decline in the Materials sector will be lead by the Metals and Mining industry with an -85% drop and the Chemicals industry with a fall of -23%.
Earnings this quarter will be affected by some of the same forces that have influenced the market over the year including; the strong dollar, price of oil, weak global growth and higher wages. The low price of oil and higher wages will benefit our economy over the long term. Over the year oil has dropped from $45.09 per barrel to $37.04.
Earnings growth is supposed to return in 2016, though the forecast for the first quarter is only supposed to be +0.5%. The U.S. Economy is projected to grow by +2.6% next year and the Eurozone's GDP should grow +1.7%.
Bad news from China spooked the markets in the first week of trading for the year, leading to one of the worst opening weeks for our stock market ever. China's GDP is supposed to grow by a respectable +6.5% rate next year, but they have been growing in excess of 10 percent over the last few years.
Kenneth Roberts is a Truckee-based Registered Investment Advisor. Information is at his blog at http://www.sellacalloption.com or 775-657-8065. The mention of securities should not be considered an offer to sell or solicitation to buy investments mentioned. Consult your investment professional to understand the risks and/or how the purchase or sale of these investments may be implemented to meet your investment goals. Past performance is no guarantee of future results.