First-quarter earnings outlook gets more negative
The earnings outlook for the first quarter has gotten more negative, as analysts trim estimates as S&P 500 companies continue to issued cautious guidance. With about 47% of the S&P 500 having reported fourth-quarter results, the blended earnings per share estimate for the December quarter--reported results and estimates of not-yet reported results--has increased to 12.5% from a year ago, compared with 10.6% at the start of earnings reporting season and 16.2% as of the start of the quarter, according to FactSet. But the outlook for the quarter ended March is now for a decline of 1.2%, compared with an increase of 1.9% at the start of earnings reporting season and growth of 6.6% as of Sept. 30. That would be the first year-over-year decline in nearly three years, if it holds. Wall Street analysts usually cut estimates as a quarter progresses, but DataTrek Research LLC says the recent cuts of 4.1% has been higher than typical cuts of 1.6% to 1.8%. "What we make of this: We're past 'peak net margins,' which occurred last year with the cut to U.S. corporate tax rates," DataTrek wrote in a note to clients. The S&P 500 has rallied 8.5% so far this year, after tumbling 14.0% in the fourth quarter.
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