As Earnings Season Closes, Signs of More Trouble Ahead

The already soft earnings quarter now ending has come with even weaker projections for the next quarter — and could be signaling that still-rosy projections for the longer range are unlikely to materialize.
With about 85 percent of the Standard & Poor's 500 [.SPX  1402.99    8.76  (+0.63%)   ] companies reporting, the results haven't been pretty: Just 51 percent have exceeded net profit expectations, with only 40 percent or so beating on revenue.

But those are backward-looking numbers.

What's even scarier is that more than 50 percent of the companies on the broad index have lowered their estimates for the third quarter, while only 21 percent have raised. Analysts have followed in kind, cutting their forecasts for S&P 1500 companies on about a 3 to 1 ratio.

Though the ratio of negative-to-positive revisions has eased a bit in the past couple of weeks, that's primarily because earnings season is coming to a close.

"Most have already said their peace and confessed," said Nick Raich, senior vice president and director of research at Key Private Bank in Cleveland. "How much further can analysts cut at this point without waiting for more company guidance that we're not going to get for another couple of weeks?"

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