I am starting to notice a trend when I read quarterly earnings releases and listen to the conference calls. Company managements are starting to build in low expectations about their 2009 results. Terms like uncertainty, global fluctuations, unable to forecast and reducing expectations are starting to become common. Here are a couple of examples I have come across recently:

Yesterday, the WD-40 Company, (NASD:WDFC), company released their first quarter results. I was curious to find out what WD-40 sold besides WD-40, so I took a look at their press release and scanned the conference call transcript. The company reported 23% higher year-over-year quarterly earnings but gave warnings about the strength of future sales. From the press release:  "Due to the deteriorating global economy, the volatility in the costs of raw materials and the significant fluctuations in foreign exchange rates, we do not have the same degree of confidence in our ability to accurately predict the future," I give the company a thumbs down for still giving earnings guidance for 2009 even after issuing the quoted disclaimer. One other item of interest from the conference call: If currency rates had been the same as the year earlier 1st quarter, net income would have been 39% higher.

A few days ago fertilizer company Mosaic (NYSE:MOS), reported 2nd quarter results with revenues and earnings up 37% and 140% respectively from a year earlier. Yet the company made clear that they are significantly reducing production for the remainder of 2009 (half of MOS' fiscal year) in light of falling demand and prices. With statements like these from the conference call: "We had previously withdrawn our sales volume guidance for the year and have no update to provide at this time other then to repeat our expectation for weak sales volumes at least through our third quarter." Analysts will be falling over themselves to reduce their future earnings estimates.

Just this morning equipment manufacturer Manitowoc Co. (NYSE:MTW), released a press report with lowered 2008 and 2009 earnings expectations. They now see 2009 earnings ($1.35 to $1.60) at less than 1/2 of what 2008 will finish with. The current analysts consensus for MTW's 2009 earnings is $2.70, so there will be a bunch of revisions. Manitowoc will not report their 4th quarter and year end results until early next month. This early warning press release give the market time to adjust to the new expectations.

My point in this analysis is that I believe the market has already discounted a whole bunch of bad news and companies cannot really hurt their share prices much by reducing or eliminating forward guidance. The three company stocks highlighted here are already 33%, 76% and 79% off their 52 week highs. There is not much downside at this point to make an effort to reduce future expectations. In the upcoming quarters and year if the economic conditions are not as bad as forecast, earnings will do much better than the now significantly lowered expectations and stock prices will rally. Once the uncertainty about the overall economy is reduced, P/E ratios will also start to return to historical norms adding to the upward move of stock prices.

This article is not to advocate any of the stocks discussed here (but I do like the 2-3 year prospects for fertilizer companies) but to give you some clues to watch for concerning stocks you are interested in and fit this pattern.