While earnings have come in mostly better-than-forecasts for the first quarter, many of the targets had been lowered, and revenues have been coming up short. Bobbi Rebell reports.
It is the homestretch of earnings season, and corporate America is not exactly knocking it out of the ballpark. About eighty percent of companies have reported, with earnings growth at 1.8 percent. But take out the beaten up energy sector and it's ten percent. About 68 percent of the S&P 500 companies earnings have been above, often reduced, forecasts. A good performance, but, still, less than the seventy percent beat rate of the past four quarters. Eric Wiegand, senior portfolio manager, U.S. Bank. (SOUNDBITE) ERIC WIEGAND, SENIOR PORTFOLIO MANAGER, U.S. BANK. (ENGLISH) SAYING: "The earnings season has been a mixed bag. It's certainly been better than feared, but not as positive as hoped.' The top sectors in terms of exceeding forecasts: 100 percent of telecoms have come in ahead, as have 82 percent of consumer staples, and health care. Although energy has had a tough time because of the huge drop in prices, it's actually done well, relative to Wall Street's expectations. But there is a catch for corporate America: revenues. Fifty six percent reported revenues below forecasts. (SOUNDBITE) ERIC WIEGAND, SENIOR PORTFOLIO MANAGER, U.S. BANK. (ENGLISH) SAYING: "That is certainly what's troubling investors right now. We are seeing less robust earnings, although it's certainly not as bad as had been feared. But we are having that coupled with, you know, certainly a negatively impacted first quarter from a GDP perspective. Certainly, a lot has been made of whether it's weather impact, whether its port closures certainly the strength of the dollar impacting exporters." The strong dollar is not only hurting companies when they translate international sales into the U.S. currency, it also makes it tougher to compete with non-U.S. based companies that can undercut their prices. David Aurelio, research analyst at Thomson Reuters. (SOUNDBITE) DAVID AURELIO, RESEARCH ANALYST, THOMSON REUTERS (ENGLISH) SAYING: "These multinational companies have about forty percent of their revenue coming from overseas. When that is translated into U.S. dollars, it hits the books, and that is a major driver for these declines " He adds that investors should expect the tough comparisons will continue for the rest of the year.