2nd. QTR earnings warnings adding up.
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EARNINGS WATCH
Second-quarter warnings adding up
By Barbara C. Costanza, CBS.MarketWatch.com
Last Update: 6:01 AM ET May 27, 2001
LOS ANGELES (CBS.MW) -- As May comes to a close, a batch of corporate earnings pre-announcements are starting to hit Wall Street, with technology companies in particular warning about profits amid the economic slowdown.
Corporate pre-announcements for the current quarter -- some positive but most negative -- are running 15 percent ahead of the first quarter, indicating another wave of analysts slashing estimates is still to come before the quarter is over at the end of June.
Leader of the pack
Leading the pack downward is technology, where expectations are down 54 percent compared with last year. Just a week ago, that expectation was at 51 percent.
"Most of the technology big names that have warned are repeat offenders: Oracle (ORCL: news, msgs, alerts) , National Semiconductor (NSM: news, msgs, alerts) , Motorola (MOT: news, msgs, alerts) and Yahoo (YHOO: news, msgs, alerts) , and these are just the bigger ones," noted Chuck Hill, research director of First Call/Thomson Financial.
Others that pre-announced already were Dell (DELL: news, msgs, alerts) , Triquint (TQNT: news, msgs, alerts) , Sawtek (SAWS: news, msgs, alerts) , Applied Materials (AMAT: news, msgs, alerts) , Corning (GLW: news, msgs, alerts) , Software company Wind River (WIND: news, msgs, alerts) and Adobe Systems (ADBE: news, msgs, alerts)
There appear to be repeat offenders across the board, from transports like Fedex (FDX: news, msgs, alerts) and United Airlines (UAL: news, msgs, alerts) to communications companies like Sprint (FON: news, msgs, alerts) and AT&T (T: news, msgs, alerts) .
In the retail sector, we've already seen warnings from Nordstrom (JWN: news, msgs, alerts) , Staples (SPLS: news, msgs, alerts) JC Penney (JCP: news, msgs, alerts) and Costco (COST: news, msgs, alerts) .
Some might believe that the repeat offenders and the increase in warnings overall is the result of Reg FD, however, Hill believes that we would've seen a record setting second quarter without the regulation.
The best-performing sector is expected to be health care, up 12 percent compared with the year-ago period, according to First Call. Although health insurance company Cigna Corp. (CI: news, msgs, alerts) doesn't appear to be following that trend and neither is Guidant (GDT: news, msgs, alerts) or Medtronic (MDT: news, msgs, alerts) .
Fear creeps in
The hope has been for a recovery in the second half of the year but that hope is dwindling.
Overall second-quarter warnings are down 12.2 percent compared with the year-ago period, while the third quarter is down 3.4 percent, so far. "The second quarter is not the concern," according to Hill. Those expectations have already been worked into the market.
The concern is that the warnings continue to accelerate and "if we are going to get a recovery in the second half," said Hill, "we should be seeing deceleration instead of acceleration."
Research from First Call indicates fourth-quarter earnings will be down 16 percent year-over-year and that number appears to be growing wider. Adding to concerns, the fact that there are a multitude of big cap companies warning. First Call has seen warnings from S&P companies up 42 percent compared with last year.
The advisories come on the heels of some disappointing financial data. The U.S. jobs report showed the economy lost jobs in April at the fastest rate in a decade. In addition, new home sales dropped 9.5 percent in April, which is the biggest drop in about four years. These indicators, along with the current batch of advisories are perpetuating worries that the current slump could last longer than expected.
Barbara C. Costanza is earnings editor of CBS.MarketWatch.com, based in Los Angeles. |
