Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : News Links and Chart Links -- Ignore unavailable to you. Want to Upgrade?

To: Les H who wrote (1011)	11/19/2001 4:55:18 PM
From: Les H	Read Replies (2) \| Respond to of 29596

MARKET EARNINGS 3Q01 Earnings Results The earnings reporting season is finally winding to a close, with 95% having reported. It is now on the downhill side of the bump for October-ending-quarter companies. Although some are still left to report, the biggest had reported by the end of last week, and most of the majors left will report this week. By the end of this week, 97% of the S&P500 will have reported. The 95% that have reported so far are showing a 21.4% decline from 3Q01. Adding in the estimates for the remaining 24 companies drags the decline down to 21.6%. Assuming none of the 24 report a major surprise, the final number will likely be 21.5% or 21.6% decline. The big losers in 3Q01 were transports down 118%, tech down 71%, basic materials down 40%, communications services down 25%, consumer cyclicals down 24%, and energy down 20%. As expected, the only sectors that did resonably well were utilities up 18% and healthcare up 16%. Earnings Warnings Bombardment Continues There were only 14 negative pre-announcements last week, but don't be fooled by that low number. The warnings are still running at a record setting pace. The 380 to date for warnings compares to 289 for 1Q01, 337 for 2Q01, 326 for 3Q01, and only 216 for the year ago 3Q00 (all at the equivalent dates in the respective quarters). It is still too early to say if the final total for 4Q01 warnings will be a new record, but there is no signs of any slowing in the rate of warnings. This week there likely will be very few warnings, but the should be a bit of a season blip in early December and a big one in early January. 4Q01 Earnings Outlook Even though last week was a light week for warnings, the estimated earnings decline for 4Q01 fell from 16.7% to 17.3%. We still believe the final results will show a decline of about 22%. The worst performing will be similar to 3Q01, except that the energy sector moves up to fourth worst. At an expected decline of 177%, the transports hold down the honor of the worst, with an even greater decline than in 3Q01. The expected decline for tech, at a 63% decline, appears not quite as bad as the 71% decline of 3Q01, but considering the much, much easier comparison to the year ago quarter (tech was up 41% in 3Q00, but only up 3% in 4Q00), tech earnings are really much worse than in 3Q01. Basic materials, at a 52% decline, gets worse in 4Q01, as does energy at a 46% decline. On the up side, health care at 13% and utilities at 11% are joined by financials at 10%. Even though our expected 22% earnings decline for 4Q01 is expected to be no worse than that of 3Q01, the real earnings picture is much worse than those numbers suggest. The much easier comparison to year ago results for 4Q01 means that 4Q01 earnings on a seasonally adjusted basis are much worse than those of 3Q01. Even without any seasonal adjustment we expect that 4Q01 earnings at $10.60 will be slightly below the expected $10.78 for 3Q01. Normally, there would be a big jump from 3Q to 4Q. CY02 Earnings Outlook The most encouraging sign is that industry analysts are cutting estimates for further out quarters than they had been before. Estimates for 1Q02 and 2Q02 are in free fall, but so far there is little movement on 3Q02 estimates. Although the pessimism has increased, it has not yet reached the over pessimism and capitulation that typically occurs before a turnaround in earnings or in the market. We continue to believe that analyst and strategist estimates for CY02 are too high and expect meaningful downward revisions, particularly in early December and in early January. The industry analysts currently expect earnings will be up 15.0% in CY02. However, 1Q01 earnings will surely be much lower than analysts are expecting. Assuming that is true, it would take a huge ramp-up in earnings from our expected $10.20 in 1Q02 to get to the industry analyst's $14.67 in 4Q01. Our estimates for the four quarters of CY01 are base on what we believe is the best case scenario. That yields an 8.6% earnings gain for CY02 over CY01. We believe the more likely outcome would be a lesser gain, probably under 5%. www1.firstcall.com\|market\|full report