Archive for the ‘Corporate Earnings’ Category

At a Loss over Profits

Monday, July 25th, 2016

Apparently, there are two Americas.

In one, corporate profits are soaring, the economy is booming and jobs are available for the asking.

In the other, corporate profits are dismal, America is in or close to a recession and more than 100 million Americans have left the labor force.

In one America, more people approve than disapprove of the job President Obama is doing (49.2% approve, 46.8% disapprove, according to Real Clear Politics).  In the other America, more than two thirds of the country believe the country is on the wrong track.  Real Clear Politics found that 69.3% of Americans believe the country is on the wrong track, while only 22.5% believe it is on the right track. Profits

While media are increasingly reporting that the economy is at or near full employment, that America is at odds with reality.  As we’ve written, participation in the labor force has dropped to 62.6%, which is near a four-decade low.

The America where the economy is booming is even more delusional.  Some may say that it’s all relative.  They may concede that U.S. growth in gross domestic product (GDP) is sluggish at best, but typically add that it’s better than GDP growth in the rest of the world. (more…)

The Flim-Flam Economy

Monday, May 2nd, 2016

The absurdity of today’s flim-flam economy can be summarized when the events of the past week are considered together:

  • The U.S. economy grew at an annualized rate of just 0.5% during the first quarter
  • Corporate profits are the lowest they’ve been since 2009
  • The current bull market is now the second longest in history
  • The Federal Reserve Board, to no one’s surprise, elected yet again not to raise interest rates

The conclusion that can be drawn is that, while the U.S. is not yet a socialist country, it is no longer a capitalist country, either.  There is a seeming collusion between political leaders and central bankers with the net result being more and more government control over our lives amid the illusion that all is well, because, after all, the stock market moves in only one direction. Equities

Mainstream media, with few exceptions, reinforce the illusion, cheerleading for the Obama Administration as it continues to break records for its ever-increasing volume of new regulations.  Burdensome new regulations reduce corporate profits, which should result in lower stock prices.  But the Fed has somehow managed to circumvent reality and juice the market ever higher.  (more…)

The End of the Road

Friday, October 12th, 2012

The problem with kicking the can down the road is that sooner or later, the road ends.

Evidence of this can be found in recent stock market performance.  Quantitative easing created a mirage, boosting demand for stocks and sending the market soaring close to its highest level ever.

However, the QE boost can’t last forever.  Sooner or later, market fundamentals have to take over.

Unfortunately, the fundamentals aren’t looking too good.  Claims of an improving economy appear to be overblown, as corporate profits are underachieving.  According to Bloomberg, for every public company that expects earnings to exceed expectations for the most recent quarter, 4.3 companies say profits will be below expectations.

That’s the highest degree of pessimist about earnings since February 2009 and it matches the pessimism of October 2001 (just after 9/11).

Major corporations, such as FedEx Corp. (FDX) and Intel have lowered their profit expectations.  FedEx, which is considered to provide a barometer for the economy as a whole, lowered its profit outlook because a weakening economy is prompting customers to switch to a lower cost means of delivery.

The first quarter for FedEx ended Aug. 31, 2012 and on Sept. 18 the company reported earnings of $1.45 per diluted share, compared with $1.46 a year ago.

Intel, which reports earnings on Tuesday, is seeing a drop because of a slowdown in sales of personal computers.  Intel is the world’s larger manufacturer of computer chips for PCs.

Bloomberg reported, “Warnings that estimates are too high by companies from Intel Corp. to Caterpillar (CAT) Inc. came even after analysts lowered predictions for third-quarter income growth by 11 percentage points this year.”

Intel’s pessimism reflects an overall drop in technology stocks and cyclicals as a group.

Apple has led the technology sell off, with its stock breaking its 50 day moving average and approaching its 100 day moving average.

The cyclical sectors benefited most from quantitative easing and led the market higher.  Now they appear to be leading the market lower.

It’s too bad that QE3 provides open-ended easing and will be ongoing for as long as The Fed sees fit.  Otherwise, Chairman Ben Bernanke could hint at QE4 and give the market another boost.  It seems that the anticipation of easing is more important to the market than actual easing.