"In terms of corporate profits, Cohen said she is still expecting profit growth of five to six percent for the Standard & Poor's 500 companies ''even if Asia stays extremely weak''.
Zeev,
I'm glad you brought up Q2 projected profit growth. I was doing some more thinking about Abby's statement, the more I thought, the less sense it made. I have to assume Abby was referring to, year over year growth, bottom line profits for the S&P 500, to be 6%. That's not asking for a whole lot considering S&P 500 is selling at a PE of 24.
Let's assume, Q1 was 1.5%. So we missed Q1 pretty badly (in order for the full year to have 6% growth, you have to hit 6% each quarter).
Okay, so let's use the projected figure of 3.5% for Q2. Well that means if you take the Q1 shortfall of 4.5%(6%-1.5%), add it to Q2 shortfall of 2.5% (6%-3.5%), add it to 6%. So we have to make a whooping 13% Q3 growth to get back on track! (13%=4.5+2.5+6)
If Q3 is under 6%, then in order for 6% yr. over yr. growth to be possible, you have to add all previous shortfalls up, add it to 6% and that will give you what Q4 has to be. Which would be pretty astronomical.
So my big question is, How in the world does Abby really expect the S&P 500 to achieve year over year growth of 6% when Q1 and Q2 are so far down right off the bat? Am I not doing the math right, or does the Emperor have no clothes?
Thanks,
MikeM(From Florida)
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