OT: Information on how the Quarter gains are coming along
Not Just Chipotle: 57% Of S&P 500 Firms Miss On Sales
Mon, Jul 23 2012 By KEVIN HARLIN
news.investors.com
Chipotle Mexican Grill ( CMG) took it on the chin Friday, diving 21.5% a day after the burrito chain beat earnings forecasts but showed weaker-than-expected revenue.
The only thing unusual was investors' reaction.
Revenue has risen less than expected, or outright fallen, across the spectrum. IBM ( IBM) came in a little light Tuesday, a sign of sluggish overall IT spending. Search giant Google ( GOOG) followed up Thursday with slightly weak ad revenue. General Electric ( GE) continued that theme Friday.
So far, two-thirds of S&P 500 companies reporting Q2 results have exceeded low-ball earnings forecasts, according to Thomson Reuters. But fewer than half (43%) have met or topped sales estimates.
Worst In Nearly Three Years
Analysts now expect sales to grow just 1%, which would be the lowest rate since Q3 2009, just as the U.S. exited recession. Analysts expect 5.9% profit growth, also the weakest since Q3 2009.
"Every quarter this keeps happening, and we wonder how much longer they can keep cutting costs and growing profits," Gregory Harrison, a corporate earnings research analyst with Thomson Reuters, said.
Chipotle closed down 86.88 to 316.98 Friday. But Wall Street has largely rewarded others. Google rose 6% for the week, including 3% Friday. GE rose 0.5% for the week. Qualcomm ( QCOM) fell short on earnings and revenue while guiding current-quarter forecasts down, but still ended up nearly 5% on hopes for strong holidays.
Expectations were so low heading into earnings season that markets have rallied on the mildest of beats or positive news, says Alec Young, global equity strategist at S&P Capital IQ.
Chipotle's problems were domestic. Europe continues to drag down sales for GE and many others. And those that bet on explosive China growth are facing slower revenue gains. A stronger dollar exacerbated weaker overseas sales.
U.S. retail sales have fallen for three straight months as job growth sputters. Europe is in recession and getting worse. China, India and Brazil are growing, but at the slowest pace in years.
Corporations have managed to deliver on earnings via cost cutting, operational efficiencies or accounting transfers. Banks, pinched by low loan margins and caps on fees, have shifted money out of loan-loss reserves to beat on profits.
But such shifts are tough to sustain, casting doubt on upbeat year-end earnings expectations. Analysts forecast revenue growth of just 0.9% in Q3 and 2.6% in Q4. But earnings are seen up a bullish 12.1% in Q4, according to Thomson Reuters.
"This modest slowdown in revenue growth and earnings growth wouldn't be so troubling if the Street didn't seem to be a little too optimistic for the fourth quarter," said S&P's Young.
The wild card is the standoff in Washington over the pending year-end "fiscal cliff" spending curbs and tax cut expiration. That could push the economy back into recession, forcing analysts to slash profit forecasts. |
