Get Ready for the Corporate Earnings Meltdown
Companies / Corporate Earnings
Aug 04, 2008 - 03:55 PM

By: Mike_Stathis

I'm not talking about the banks or even the retailers. We all know they will continue to slide. I'm talking about everything else. With no real median wage growth since 1999, and soaring inflation for gas, food and healthcare, it's obvious consumers have had much less to spend. Not only has that hurt savings rates (including retirement contributions) but it's also affected consumer spending. But don't expect things to get better by Fall. In fact, I'm expecting the earnings meltdown to begin for much of the remaining sectors in the S&P 500.

You Can Run But You Can't Hide

Standard & Poor's earnings estimates for Q2, Q3, and Q4 of 2008 are -11%, 40%, and 60% respectively. Remember, this the same S&P that rated the mortgage junk AAA. It will also be the same S&P that will end up issuing drastic revisions in earnings once the bottom falls out. But that won't help investors after the fact. You have to realize what lies ahead and react accordingly. With about 63% of the S&P 500 companies having reported Q2 earnings, the results have not been so bad, with about 71% having beat the 2007 mark. In fact, as the pundits love pointing out, “if you remove the problem child – the financials, S&P earnings have increased by 10%.â€