75% of earnings recessions since World War II have morphed into economic recessions, according to this strategist
Earnings in the S&P 500 index SPX, -0.04% are now projected to decline 1.51% in the fourth quarter from the year before, according to a FactSet computation of analysts’ average forecasts for individual companies.
The S&P 500 has notched 10 new all-time highs since Oct. 28, but “during that entire time, earnings forecasts have been coming down,” he noted. While third-quarter earnings did fall, the decline wasn’t as steep as what analysts had originally projected, marking the 31st straight quarter when actual profits exceeded end-of-quarter estimates.
Some of those forecasts caused huge swings. General Motors Co. GM, +1.73% was expected to post a 33.1% fourth-quarter increase as of Sept. 30, but earnings are now projected to decline nearly 89% after a workers’ strike lasted more than a month. Rival Ford Motor Co. F, +1.61% slumped to projections of a 40.2% decline from a 7% drop amid negative impacts from warranties, incentives, and its Chinese joint venture.
Crude and natural gas prices remain below where they were in the fourth quarter of 2018, which is likely to contribute to continued profit pressure for energy companies. Chemicals companies like Dow Inc. DOW, -0.15% and DuPont de Nemours Inc. DD, +0.65% dominate the materials sector and are expected to show sustained margin weakness.
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