US CEOs are more pessimistic about corporate earnings than any time since the financial crisis, according to research from Bespoke Investment Group LLC.
The percentage of companies cutting profit forecasts during this earnings season has outpaced those with upward revisions by 8.6 percentage points, the widest margin in six years, according to data compiled by Bespoke. Consumer companies and drugmakers are the most bearish among 10 major industries, with at least 18 percent of each group providing lower guidance, the data show.
Plunging oil prices and a strengthening US dollar are wreaking havoc on earnings this month, as Procter & Gamble Co to Caterpillar Inc and Pfizer Inc joined an increasing number of companies announcing disappointing forecasts. While the reduction in projections sets a lower bar for companies to exceed, the dismal outlook undermines the bull market where five years of profit expansions have helped the S&P 500 to triple.
“It looks like either companies were caught way off guard or they are throwing in the towel on 2015,” Bespoke, based in Harrison, New York, wrote in a note to clients on Friday. “Looking on the bright side, though, this gives the market a big opportunity to surprise on the upside.”
The S&P 500 has fallen 1.6 percent since Alcoa Inc started this earnings season on Jan. 12, the worst return for the first 18 days of any reporting period in a year. The benchmark gauge for American equity last month lost 3.1 percent.
Corporate profits had been a boost to equities, with the S&P 500 gaining an average 1.9 percent over the first 18 days of all earnings seasons since the bull market began in March 2009, data compiled by Bloomberg show.
Analysts now expect earnings per share (EPS) from S&P 500 companies to decline 2.1 percent in the first quarter and fall 1.1 percent over the following period, estimates compiled by Bloomberg show. Should the forecasts come true, it would be the first back-to-back profit contractions since 2009.
At the end of last year, analysts projected growth of at least 3.3 percent for each of the two quarters.
“While the dollar has been getting all the headlines, the real ‘game changer’ for EPS expectations has been oil prices,” Wells Fargo & Co senior strategist Gina Martin Adams wrote in a note on Friday. She estimates energy has accounted for 75 percent of the downward revision to the S&P 500’s earnings expectations so far this year.
“When the bar is low, it is most easily beaten, and in our view the bar is now very low,” she said.
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy
Sales in the retail, and food and beverage sectors last month continued to rise, increasing 0.7 percent and 13.6 percent respectively from a year earlier, setting record highs for the month of March, the Ministry of Economic Affairs said yesterday. Sales in the wholesale sector also grew last month by 4.6 annually, mainly due to the business opportunities for emerging applications related to artificial intelligence (AI) and high-performance computing technologies, the ministry said in a report. The ministry forecast that retail, and food and beverage sales this month would retain their growth momentum as the former would benefit from Tomb Sweeping Day