Corporate America is fast approaching a forgettable
milestone: More than 1,000 U.S. companies are expected to issue negative
earnings preannouncements for the second quarter.
The first quarter's record of 935 negative preannouncements could easily
be smashed, as companies realize that economic conditions deteriorated
more sharply than they had anticipated, analysts say. Many companies
continue to ratchet down their expectations, and some of them have
already issued second and third warnings about the latest quarter.
So far, 538 companies have announced they will miss earnings numbers --
65% of the 825 companies that so far have preannounced -- a pace that
will only accelerate in the next couple of weeks as the high point of the
confession season kicks in, says Joe Kalinowski, who tracks earnings at
Thomson Financial/First Call. He predicts a "swooping down" of estimate
reductions that will end up swamping all other tallies by Thomson Financial
since it began tracking numbers in the first quarter of 1996.
All this bad news comes as investors had been factoring in a quicker
recovery for profits. "Expect downward pressure on equity prices" as
investors react to the parade of poor earnings performers, Mr. Kalinowski
says.
To be sure, major stock-market indexes are already weak, having reacted
early on to what was expected to be a very tough second quarter. But the
weakness could linger because the magnitude of the second quarter
shortfall was more severe than expected, prolonging companies'
recoveries, some analysts said.
Some signs during the past two days have, in fact, indicated that the storm
clouds will take some time to clear. The usual culprit was afoot: A host of
companies, including Tellabs, Teradyne and Jabil Circuit, warned
Wednesday that they will miss expectations for their current quarter.
From Dow Jones newswire.... |
