Tahoe-Truckee Market Beat: Strong US dollar likely to impact second quarter
July 14, 2015
Earnings reporting season has just gotten under way. Alcoa was the first company to report, and they opened second quarter earnings on July 8 with a strong report. Corporate earnings are the number one driver of stock prices.
According to FactSet, earnings for S&P 500 companies for the second quarter this year are projected to decline by -4.4 percent.
The last time a year-over-year earnings drop was reported was the third quarter of 2012, and that decline was only -1.0 percent.
This quarter is projected to have the largest drop in year-over-year earnings since the third quarter of 2009, when earnings declined -15.5 percent. So far, only 24 companies have reported and of those 16 have beaten their earnings estimate.
There are several companies poised to report very strong year-over-year earnings growth.
According to an article by Philip Van Doorn in Market Watch, there are some companies that should report growth above 35 percent, and that list includes Apple, Target, General Motors and more.
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Apple's earnings are projected to grow by 39 percent and their sales should grow 30 percent, mostly due to the iPhone.
First Solar leads the list with a projected growth rate of 605 percent, and is followed by News Corp and Adobe Systems with projected earnings growth rates of 474 percent and 271 percent, respectively.
It will be interesting to see how the earnings season plays out this quarter. We'll get the results over the next few weeks.
The strong US dollar will still have an impact on the earnings of multi-nationals that generate a lot of revenue overseas.
The bar is set pretty low this time with a projected drop of -4.4 percent, so hopefully we'll see many upside surprises.
I'll do a follow report when the earnings' reporting is complete. One thing to watch for is how companies write their press releases — sometimes they are so vague and confusing they can be difficult to decipher.
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.
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