I suppose you would somehow define this as 'gloom & doom'
Earns outlook 'impressive': researcher
Positive news points to strong gains for second quarter
By Russ Britt, CBS.MarketWatch.com
Last Update: 5:18 PM ET June 19, 2004
LOS ANGELES (CBS.MW) -- Maybe it'll happen, maybe it won't. But markets are poised for huge gains if second-quarter earnings projections are any indication.
That's the word from stock researcher Thomson First Call, which said in a report issued this week that the outlook for the quarter is "impressive," based on announcements ahead of the June 30 end of the period.
First Call says the ratio of negative-to-positive earnings outlooks is greater than last quarter and the year-ago quarter. As a result, earnings should be up an average of 26 percent, up from previous estimates of 20.3 percent.
"The abundance of good news has led to the highest upward percentage point revision to the S&P 500 index during the course of a quarter since we started tracking the aggregate data," the report says.
First Call said that as of Friday, there were 1.4 negative earnings reports for every positive report throughout Corporate America. That's down significantly from the 1.8 ratio reported in the first quarter, and the 2.0 reported a year ago.
For S&P 500 companies, the tide has turned in favor of the positive. Through Friday, there were 0.8 negative reports for every improved outlook.
Among those making major announcements was steelmaker Nucor Inc. (NUE: news, chart, profile) The company said Tuesday it expected second-quarter earnings to run between $2.75 and $2.95, well above the First Call consensus of $2.30 among analysts it polled.
"Increased margins and the continued strengthening of global and domestic demand for steel have contributed to a better-than-expected second quarter," Dan DiMicco, Nucor's chief executive, said in a statement.
Nucor reported earnings of 11 cents a year ago and $1.43 in the first quarter of this year. The company's shares gapped up from $66.85 to $69 at the announcement, and kept rising all week. Nucor closed Friday at $72.47, up $1.77, or 2.5 percent.
Other sectors are getting a boost. Sabre Holdings (TSG: news, chart, profile), owner of the Travelocity online travel site, said better-than-expected bookings caused it to raise its expectations for the quarter. The company was expected to earn 36 cents a share, First Call said. Now the estimate is 43 cents a share.
Sabre's shares also gapped up $1 to $26.32 on Tuesday, the day of the announcement. Since then it has climbed and settled back a bit. On Friday, the company's shares closed down 82 cents, or 2.9 percent, to $27.17.
The bright outlook isn't without its caveats, First Call said. Tech companies such as Jabil Circuit (JBL: news, chart, profile) voiced concerns over inventory conditions and said its fiscal fourth quarter would be soft.
"Inventories are an issue and are causing headaches in the manufacturing schedules," the report said. "These inventory hang-ups will lead to lumpiness in technology profits during the balance of 2004."
But First Call said production numbers and capacity reports, and inflation talk is encouraging more than anything.
"Whiffs of inflation have turned into heavy wafts with both the [consumer price index] and [producer price index] experiencing substantial increases during May," the report said, "but prices moving north is a welcome relief from the 'Chicken Little' deflation talk of a year ago."
Russ Britt is the Los Angeles Bureau Chief for CBS.MarketWatch.com.
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