The Lost Earnings Season

Through Tuesday morning, nearly half of the components of the Standard & Poor’s 500-stock index had reported results. The blended growth rate, which combined those that have reported earnings and those yet to report, stands at negative 23.8%, with most of the decline the result of financial shares, which sport a negative 150% year-over-year growth rate, according to Thomson Reuters.

When financials are excluded, along with the other outlier, the energy sector, third-quarter growth has come in at negative 0.1%. But it’s not as if this wasn’t expected — 61% of companies have beaten estimates, a bit more than the 60% historical average, dating to 1994. More companies have missed estimates, however, with about 28% falling short, compared with the 21% historical average.

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Fourth-quarter forecasts do not inspire, and the dramatic selling in October may in fact be brought on in part by this, even if there are other, more spectacular reasons for the decline. Thomson Reuters estimates a 32.9% growth rate for earnings in the fourth quarter, but excluding financials (expected to post strong growth because of the lousy end of 2007) and energy, it’s expected to come in at 1.8%. As of October 1, the expectation was for growth of 7.9%.

http://blogs.wsj.com/marketbeat/2008/10/28/the-lost-earnings-season/