Earnings Season Is Here, And It Looks Underwhelming

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Includes: BAC, C, JPM, WFC
by: Kapitall

By Mary-Lynn Cesar

Companies are sharing their first-quarter earnings. There's a good chance it isn't going to be pretty.

If analysts and corporate leadership are right, this earnings season will be nothing to write home about - unless you're writing about how corporate profits have fallen for the fourth consecutive quarter.

Optimism and, apparently, profits are in short supply on Wall Street. Goldman Sachs shared its negative outlook for the current earnings season in its weekly note, writing, "Following the depths of the global financial crisis, guidance has grown increasingly negative, and has been worse-than-average since 2012." Data from S&P Global Market Intelligence supports Goldman's findings - it suggests there will be an 8.1% decline in S&P 500 companies' earnings during the first quarter of 2016.

Last year, energy companies were mainly responsible for dragging corporate profits down. While the sector will once again lead the slide - the International Business Times reports a projected 105% plunge in earnings - banks are also expected to be big losers this earnings season. Per Money, analysts forecast a 9.2% drop in financial sector earnings and a mere 0.2% increase in sales.

Over at Barron's, Asia markets columnist Shuli Ren points out that corporate earnings recessions have historically gone hand-in-hand with economic recessions. The most recent exception was the 1998 Asian financial crisis, which led to shrinking profits but didn't impact the U.S. economy.

That's not to say a recession isn't possible. Morgan Stanley believes there's a 30% chance of a global economic recession occurring this year. Back in February, JPMorgan Chase said the probability of the U.S. economy entering a recession was at 32%, considerably higher than the typical probability of 20%.

Later that month, Citigroup also expressed concern over the state of the global economy in a note, writing, "We are currently in a highly precarious environment for global growth and asset markets after two to three years of relative calm." The bank didn't believe that the U.S. would enter a recession, instead stating that any hiccups in domestic economic growth would have serious, negative impacts on the world economy.

At the moment, the U.S. economy isn't in a recession, but growth has slowed. According to the Commerce Department, GDP grew at an annualized rate of 1.4% in the fourth quarter of 2015, down from 2% in the previous quarter. And if The Wall Street Journal's Economic Forecasting Survey is right, the downward trend will continue in the first quarter of 2016. Economists surveyed by the Journal estimate that GDP grew by 1.3% during the first three months of the year.

The first earnings report for Q1 2016 arrives after market close on Monday via aluminum producer Alcoa (NYSE:AA), the unofficial harbinger of the earnings season. Several big banks are also reporting earnings this week, and the list below includes the earnings date, analyst estimates for earnings per share and revenue, as well as the year-over-year change in both metrics for each bank.

Click on the interactive chart to view data over time.

  1. Bank of America Corporation (NYSE:BAC): Provides banking and financial services to individuals, small- and middle-market businesses, corporations, and governments, primarily in the United States and internationally. Its market cap is at $134.65B, with its most recent closing price at $12.88.

    Bank of America reports its first-quarter earnings on Thursday, April 14, before market open.

    Analysts expect EPS of $0.21, down 22.22% from EPS of $0.27 reported a year earlier, and $20.33B in revenue, down 5.10% from $21.42B reported a year earlier.
  2. Citigroup Inc. (NYSE:C): Provides consumers, corporations, governments, and institutions with a range of financial products and services. Its market cap is at $178.77B, and the most recent closing price is at $58.92.

    Citigroup reports its first-quarter earnings on Friday, April 15, before market open.

    Analysts expect EPS of $1.07, down 29.14% from EPS of $1.51 reported a year earlier, and $17.61B in revenue, down 11.10% from $19.81B reported a year earlier.
  3. JPMorgan Chase & Co. (NYSE:JPM): Provides various financial services worldwide. Its market cap is at $214.91B, and the most recent closing price is at $57.74.

    JPMorgan reports its first-quarter earnings on Wednesday, April 13, before market open.

    Analysts expect EPS of $1.26, down 13.10% from EPS of $1.45 reported a year earlier, and $23.40B in revenue, down 5.70% from $24.82B reported a year earlier.
  4. Wells Fargo & Company (NYSE:WFC): Provides retail, commercial, and corporate banking services primarily in the United States. Its market cap is at $239.16B, with its most recent closing price at $47.07.

    Wells Fargo reports its first-quarter earnings on Thursday, April 14, before market open.

    Analysts expect EPS of $0.98, down 5.77% from EPS of $1.04 reported a year earlier, and $21.62B in revenue, up 1.60% from $21.62B reported a year earlier.

(One-year return data sourced from Zacks Investment Research. Analyst estimate data sourced from Yahoo Finance. All other data sourced from FINVIZ.)

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