Financials' Losses Grow Seven Fold - Earnings Trends
Highlighted stocks include Eli Lilly & Co. (LLY), Forest Laboratories, Inc. (FRX), General Mills, Inc. (GIS), Coventry Healthcare, Inc. (CVH) and NVIDIA Corporation (NVDA).
Key Points:
- Early reports (93 total) have been ugly with total net income 63.5% below year ago levels
- 22.5% firms to reporting so far have red ink
- 51.7% of Financials in the red; Financials red ink so far is almost 7x year ago levels
- Excluding Financials, total earnings are down 9.5%
- 4Q total net income expected to be 29.6% below year ago
- Estimate cuts running 6:1 over increases for both 2009 and 2010
- Total net income in 2009, now expected to be 2.5% below 2008; but in reality, profits will most likely be down much more (perhaps just move the decimal point)
- Bottom up estimate for S&P 500 now $71.34 in 2009, down from $72.41 on Tuesday and $73.62 a week ago; I expect it to be less than $60.
- P/Es based on 2009 estimates will prove to be to low as "E" plunges
- Trends are terrible, 2009 expectations fell 1.6% in 2 market days
Total Net Income Growth
- Early returns very ugly, the 93 companies that have reported are showing earnings of just $11.1B aggregate versus total earnings of $30.3B a year ago and $38.7B in the third quarter
- Excluding Financials, total net income down 15.5% from a year ago
- Energy, Materials and Discretionary all expected to be down over 40% in the fourth quarter
- Total net income expected to fall 29.6% in fourth quarter from a year ago; was -23.7% a week ago
- Negative year-to-year growth in 4Q now expected for six sectors
- Financials were expected to report high growth due to easy comps, but have gushed red ink in early going
- Full-year net income in 2009 expected to be down 1.7% from 2008 levels, following a 11.6% decline in 2008
- First-quarter total net income is now expected to be 15.1% below a year ago; was -13.7% on Thursday
- Early 2010 expectations looks for 19.6% growth over 2009
- Index changes mask size of earnings decline in 2008 (Merril, Wachovia, National City and AIG are gone)
| Total Net Income Growth (Reported) |
| Sector |
Q2 '08 A |
Q3 '08 A |
Q4 '08 A |
Q1 '09 E |
2007 A |
2008 A |
2009 E |
2010 E |
|
| Energy |
16.10% |
18.26% |
15.19% |
3.89% |
72.71% |
28.36% |
12.90% |
-1.86% |
|
| Industrials |
6.57% |
9.04% |
6.80% |
-15.19% |
18.98% |
13.02% |
-5.75% |
12.50% |
|
| Utilities |
0.70% |
-14.02% |
2.57% |
14.13% |
29.56% |
-5.97% |
1.70% |
8.66% |
|
| Health Care |
3.60% |
1.93% |
1.90% |
-4.65% |
30.18% |
7.98% |
3.10% |
8.70% |
|
| Cons. Stap. |
11.41% |
2.99% |
-1.47% |
-9.96% |
12.21% |
4.68% |
4.56% |
7.50% |
|
| Technology |
26.23% |
16.53% |
-16.42% |
-19.66% |
19.14% |
20.06% |
-5.63% |
18.63% |
|
| Cons. Disc. |
-13.81% |
22.35% |
-24.23% |
-27.27% |
-10.79% |
1.86% |
-6.20% |
18.74% |
|
| Materials |
3.68% |
-19.02% |
-38.64% |
-39.32% |
11.65% |
-8.43% |
-22.38% |
39.37% |
|
| Financials |
-62.47% |
-75.02% |
-584.33% |
-46.10% |
-28.17% |
-98.60% |
2663.39% |
85.54% |
|
| S&P |
-24.87% |
-25.49% |
-63.53% |
-21.88% |
-6.74% |
-33.77% |
19.60% |
29.28% |
|
| Total Net Income (Reported) |
| Sector |
Q4 '08 |
Q4 '07 |
Q3 '08 |
Q3 '07 |
| Technology |
$13,996 |
$16,745 |
$14,778 |
$12,682 |
| Health Care |
$6,275 |
$6,157 |
$6,420 |
$6,299 |
| Industrials |
$4,685 |
$4,387 |
$4,953 |
$4,542 |
| Cons. Stap. |
$1,623 |
$1,647 |
$1,528 |
$1,483 |
| Cons. Disc. |
$1,321 |
$1,743 |
$3,297 |
$2,695 |
| Utilities |
$907 |
$884 |
$975 |
$1,134 |
| Materials |
$710 |
$1,157 |
$925 |
$1,142 |
| Energy |
$419 |
$363 |
$389 |
$329 |
| Financials |
($18,874) |
($2,758) |
$5,389 |
$21,570 |
| S&P |
$11,060 |
$30,325 |
$38,653 |
$51,876 |
| Total Net Income Growth (Not Reported) |
| Sector |
Q2 '08 A |
Q3 '08 A |
Q4 '08 E |
Q1 '09 E |
2007 A |
2008 E |
2009 E |
2010 E |
| Financials |
-42.76% |
-109.71% |
35.73% |
30.68% |
-4.68% |
-51.11% |
42.11% |
16.49% |
| Utilities |
4.67% |
-4.87% |
28.90% |
-13.46% |
8.06% |
4.99% |
4.62% |
11.10% |
| Health Care |
10.73% |
8.85% |
8.74% |
2.42% |
16.62% |
7.59% |
6.97% |
9.63% |
| Cons. Stap. |
1.29% |
14.31% |
0.41% |
5.88% |
6.82% |
11.31% |
8.25% |
6.76% |
| Telecom |
-1.11% |
-15.97% |
-16.34% |
-7.80% |
18.24% |
-4.98% |
-3.54% |
5.62% |
| Industrials |
6.14% |
-0.90% |
-34.90% |
-7.99% |
8.17% |
-1.52% |
-12.33% |
5.10% |
| Technology |
9.11% |
-1.75% |
-36.94% |
-25.38% |
5.00% |
9.98% |
-14.32% |
16.06% |
| Materials |
7.01% |
6.41% |
-43.51% |
-43.26% |
9.75% |
-9.30% |
-33.82% |
34.67% |
| Energy |
16.26% |
56.87% |
-47.72% |
-42.47% |
8.71% |
18.07% |
-35.35% |
25.93% |
| Cons. |
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