There's Been No Basis for Earnings Fear So Far

The first two weeks of 2009's earnings season have the perma-bears calling for earnings disasters in the Q1 results. A "sucker rally" is in progress they proclaim. But so far the profit jitters are unfounded and the only "suckers" to be found are packaged as candy on a stick.

The season kicked off last week with Alcoa (AA) missing forecasts, but painting a quite rosy picture for 2009. AA stock has never looked back.

Then came the Wells Fargo (WFC) boom-shell and a string of other positive news on Thursday.

And now just days after the Wells Fargo surprise, we have Goldman Sachs (GS) also crushing the Street's expectations. GS also joins a significantly growing list of banks that are now planning to quickly pay back their treasury bailout monies. GS will issue $5 billion in new stock to assist in paying back the US taxpayer swiftly.

And surprises to the upside did not halt with bank cheer Monday night.

Dress Barn (DBRN) also proclaimed a positive 2009 outlook. It raised its forward looking guidance pointing to improving retail trends across all its business units.

Federal Signal (FSS) followed with cheery news also raising its 2009 guidance. The global firm manufactures products and delivers integrated solutions for municipal, governmental, industrial, and airport customers worldwide.

And on Tuesday the insurance sector is likely to applaud loudly for MetLife (MET). The insurance giant asserted that it won't need bailout funds that US Treasury programs are extending to insurance institutions.

And to round out the night of No Fear, J.B. Hunt (JBHT) beat the Street by 2 cents. For them, trucking demand seems to be building again. Their 24c/share earnings were down only 4 cents from the 28 cents a share in the period a year-ago.

Aluminum started producing silver linings last week. Earnings season continues this week with the only suckers appearing as red-faced bears on a stick.

Comments

[funy1.blogs...:]

Yourself and nearly everybody in on this charade( that would include all analysts and most print and media reports) are conveniently forgetting that Goldman Sachs skipped over reporting their 1 Billion dollar loss from December 2008 in order to report profits from a March quarter that was not originally included in analyst estimates.

In effect, this is an unheard of 4 month quarter without the losses of the first month.

Factor in 1 Billion $ additional losses and they miss analyst estimates by a large amount. Back out their profits from March 2009 and they may be sitting on losses that missed estimates by a country mile.

Sooner or later, this news is going to come since not everyone is in on the conspiracy to make the losses from December not count.

Care to rephrase or is the truth too much for you?

For more details on GS's earnings and WFC's upcoming disasterous numbers check out my blog where I tell it like it is rather than pump on unsuspecting noobs.

Apr 14 05:19 AM

[apppro:]

Of course the fears are overblown! Just like the totally exaggerated scenarios used in housing to prove that 90% of mortgages were bad when in actuality 92% are still being paid and serviced on time.

Shorts thrive on fear and ignorance. Without it, rationality takes over and they can't have people seeing the truth, that:

Shorts lobbied to have FASB & SEC change long standing rules, so that they could abuse lax trading rules in order to proceed with vigor with "The Shorting of America"!

Things were never as bad a handful wanted us to believe!

Deplorable! Just deplorable!

Apr 14 06:46 AM

[D_Virginia:]

I think we're all missing the biggest reason why most earnings will be at least decent: Expectations and estimates are pitifully low.

This has been happening since last Fall, companies can jump up 10% with "not as horrible as expected losses", and "misses earnings but guides higher" reports.

If you set the bar low enough, everyone looks like a superstar.

Apr 14 08:33 AM

[Allan Frain:]

Can those who took Bailout and AIG money, carry unestimable (but not marketable) assets on their balance sheets, and will participate in clandestine "stress tests"--be trusted in their earnings reports ? It appears that this will be voted on in the equities market. Too bad those reporting the earnings are the biggest participants in the market recently.

Apr 14 09:24 AM

[User 305589:]

Highly superficial article with zero content (not to speak of alpha)
I suggest you read something really sensible and well-thought on the earnings that are coming in (and those that have to be expected for the next quarters):

www.frontlinethoughts....

aporpos, Goldman Sucks.
GS changed the reporting period. if you include the december losses that they 'avoided' by that maneuvre their 'earnings' look much less impressive.

Goldman claims to have 'earned' 20 billion $ over the past five years but if you look at the cash flow statement they LOST 100 billion in cash. Since balance sheet and cash flow statements are harder to manipulate than the income statements (where you can basically report any 'earnings' you desire) I am inclined to say that things are much worse at Goldman Sucks than they appear at first glance. Add to this theat Buffet only purchased preferred shares at very punitive terms to goldman (above all the GS parthers are not allowed to cash out before him!). Add to this that their equity is LESS than their L3-assets alone. All of a sudden you know WHY they changed their reporting period in order to report seemingly good 'earnings' only to hastily make another secondary 5 bn offering.

Apr 14 09:32 AM

[kelm:]

There is no new fear with respect to earnings is about the best you can say. Expectations are extremely low so surprises may be in store. The market apparently wants to rally - ok, let it. I have to agree with the comments above though - this is very superficial.

Apr 14 09:41 AM

[Fred Voetsch:]

There's no need for fear or disappointments if you are dealing with reality. A pollyanna calling realists "permabears" is just funny once you take a look at the real deal at Standard & Poors:

www2.standardandpoors....

As explained so well over at...

www.decisionpoint.com/...

...stock prices are still way overvalued at current levels unless we go back to a 1980's & 1990's economy and anyone betting on that needs to do a bit of research into historical trends and our current economic climate.

WSJ P/E data (S&P is not accurate):
online.wsj.com/mdc/pub...

P/E ratios:

DJIA: 27
DJTA: 25
NASDAQ: 12 (could not verify)
S&P 500: 56 (as of 10:48 am PST)

All numbers are (should be) based on trailing, 12 month, as-reported earnings.

As we saw with the retails sales numbers, and in fact, all throughout the economy, things are slow, at best. If you normalize earnings to $50 (a stretch, IMO) the S&P 500 should still be under 500 at some point in the not-so-distant future.

Apr 14 01:52 PM

[Fred Voetsch:]

On Apr 14 09:32 AM User 305589 wrote:

> Highly superficial article with zero content (not to speak of alpha)
>
> I suggest you read something really sensible and well-thought on
> the earnings that are coming in (and those that have to be expected
> for the next quarters):
>
> www.frontlinethoughts....


Hey, cut that out! John Mauldin is a critical thinker who doesn't just listen to the likes of Cramer and Kudlow. Please don't spoil the pollyanna party going on here with facts and data. That's not fair!

sorry...hehe....

Apr 14 01:56 PM

[E Nuff Sed:]

No secret that we are in a recession and earnings have collapsed. But they will recovers just as morning comes after night. We are likely in a cyclical bull market within a secular bear. I think this bull should run for another 1 - 2 year.
Here is Leutohold's take on this,
www.bloomberg.com/apps...

Apr 14 07:53 PM