Earnings Outlook

Earnings outlook is holding around its most pessimistic levels ever.

“93 out of the 111 companies in the S&P 500 that have issued an earnings outlook for the first quarter have guided below Wall Street’s consensus estimate. That’s the second-highest number of companies issuing warnings since FactSet began tracking guidance data in 2006. The highest number came just three months ago — for 2013’s fourth quarter.” (FactSet)

Executives love to low-ball estimates. They are going to great lengths to underpromise and manage expectations so they can deliver and beat consensus expectations. And this is probably wise since the market is pretty focused on ‘the beat-rate”. Despite the negative outlook the market has reacted positively.

Negative to Positive Earnings Announcements

Much is expected from corporate profit margins.

“Profit margins for the broad market and most sectors stand at record high levels. Managements have been struggling to maintain current margins, a point that was made abundantly clear on the recent quarterly conference calls.” (Goldman Sachs)

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