Earnings calls wake up to Wall Street pain

Posted by Press Release | September 24, 2011 .

NEW YORK |
Sat Sep 24, 2011 7:14am EDT

NEW YORK (Reuters) – Earnings forecasts for U.S. companies are starting to feel the pain on Wall Street and in the broader economy as the odds of another recession rise.

Intense fear that global debt issues and stagnant growth cannot be resolved has pummeled market confidence in the past couple of months.

Earnings have been one of the market’s few positives, coming in strong despite economic woes.

But analysts now are toning down double-digit growth targets for the rest of this year and next on the heels of a record second quarter.

A distressing signal came from FedEx Corp, the world’s No. 2 package delivery company, which many on Wall Street look to as an economic bellwether. FedEx lowered its full-year profit outlook this week, citing high fuel costs and a struggling global economy.

Since July 1, the Standard Poor’s 500 Index has tumbled 15 percent. Forecasts for third-quarter earnings for the SP 500 companies have slipped to 13.7 percent growth from 17 percent, according to Thomson Reuters data. But many strategists say those estimates are still too high.

For next year, SP 500 earnings-per-share estimates are eyeing $112, which would be a record.

“If that number is anywhere near real, order the champagne now,” said Howard Silverblatt, senior index analyst at SP.

Over the last few weeks, analysts have cut earnings estimates for SP 500 companies across all sectors except technology. Financials are among the hardest hit.

Negative guidance from companies is also on the rise, outweighing positive guidance by a ratio of more than 2 to 1.

Estimates for the fourth quarter and 2012 are down slightly to around 15.4 percent and 13.5 percent, respectively, and could pull back further as analysts react to more guidance, as well as to critical economic data, including housing and jobs numbers, and

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