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On October 20 I noted that McDonald's (NYSE:MCD) accomplished two things last quarter that it hadn't managed to do in nearly a decade, and both of those things spelled bad news. Quarterly sales grew at the slowest pace in nine years and, for the first time in nearly a decade, same store sales growth failed to top 2%. On Thursday morning, McDonald's reported another "first in nine years" event. This time the bad news was about same store monthly sales which, for the first time since 2003, actually fell. While some of the blame was placed on competition, a weak economic landscape overseas was likely the main culprit.

This is indicative of a negative trend going forward and it underscores what was so bad about third quarter earnings. It's not so much that the revenue numbers came in light for a slew of important companies as much as it is what the topline misses said about the outlook. Some of the revenue shortfalls were a result of decreased capex, pointing to CEOs' cautious outlook for the months ahead. Combine this with the more overt sign of a pessimistic bent, guidance cuts, and it is more than clear that the quarters ahead will be quite challenging.

Along these lines Goldman's David Kostin recently discussed some important themes that emerged from third quarter earnings and unsurprisingly the global growth outlook and uncertainty were at the top of the list. Specifically, Kostin said that out of a sample which included Honeywell (NYSE:HON), McDonald's, JPMorgan (NYSE:JPM), Costco (NASDAQ:COST) and Verizon (NYSE:VZ),

"...managements stressed hesitancy to invest...curtail[ed] capital spending...[and] conservative guidance. Consumer facing firms highlighted the risk of a possible retrenchment in sentiment if conditions deteriorate. While some managements focused on the proximate risks through year end, others argued that uncertainty is likely to persist in 2013." (emphasis mine)

In a second sample which included Dow Chemical (NYSE:DOW), Johnson & Johnson (NYSE:JNJ), IBM, Intel (NASDAQ:INTC) and Nike (NYSE:NKE), Kostin noted that,

"...most firms expect 2012's sub-trend domestic growth will continue in 2013. Recessionary conditions in the euro area were recognized as was the long dated nature of reform, leading some firms to modify operations in the region or sharply reduce performance expectations."

Put simply, it makes little sense to be buying stocks now, near what UBS reminds us is a cyclical high, when companies see an increasingly challenging environment in terms of earnings growth. Combine this with the fiscal cliff uncertainty and you have a powerful thesis for shorting the broad market (NYSEARCA:SPY) (NASDAQ:QQQ).

Source: Goldman's Look Back At Earnings Season Paints Grim Picture