{"id":3060,"date":"2016-01-29T21:26:48","date_gmt":"2016-01-30T02:26:48","guid":{"rendered":"http:\/\/162.223.13.186\/~zacksim\/earnings-down-but-not-out\/"},"modified":"2022-02-26T13:23:01","modified_gmt":"2022-02-26T13:23:01","slug":"earnings-down-but-not-out","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/earnings-down-but-not-out\/","title":{"rendered":"Earnings Down, But Not Out"},"content":{"rendered":"

Earnings Down, but Not Out <\/strong>\u2013 Q4 2015 results are in from 173 S&P 500 members, who combine for nearly half of the index\u2019s total market capitalization. It\u2019s been a bumpy start to say the least \u2013 total earnings for these reported companies are down -1.6% from the same period last year on -1.9% lower revenues (with 72.8% beating EPS estimates and 47.4% coming ahead of revenue estimates).<\/p>\n

The Energy drag is still very much in play, but Q4 is different from Q2 and Q3 in that earnings would probably be negative even if we excluded the Energy sector from the picture. The stronger dollar is costing corporations billions and cyclicality is also to blame here. For the quarter, Zacks expects an earnings decline of -5.8% on -4.4% lower revenues, which would mark the third consecutive quarter of earnings declines for the index. But, a detailed analysis will reveal that it\u2019s really a patchwork of weaknesses and strengths, not just weaknesses. Facebook (ticker: FB), for instance, blew away Wall St. estimates and posted more than $1B in quarterly profit for the first time ever.<\/p>\n

Russia\u2019s Economy Has Seen Better Days<\/strong> \u2013 Russia\u2019s energy-dependent economy has seen better days. In 2015, Russia\u2019s economy contracted by its greatest amount since 2009 on lower oil prices and the impact of U.S. and European sanctions over the conflict in the Ukraine. Data shows that Russian GDP fell a steep 3.7% last year after posting a little growth in 2014. It goes to show just how much pain a non-diverse economy can feel when its bread and butter revenue generator \u2018goes south.\u2019 Many investors think Russia is bigger and more impactful than it is, but it\u2019s actually quite small relative to the world \u2013 only accounting for about 3% of global GDP. On the bright side, there can be a strategic advantage to a contracting economy \u2013 consumers need to rein in spending and tend to do a lot of budget shopping. Maybe that\u2019s why McDonald’s (ticker: MCD) is planning to open more than 60 restaurants there next year.<\/p>\n

Time to be More Bullish on Europe?<\/strong> \u2013 The head of the European Central Bank (ECB), Mario Draghi, is a pretty straight shooter. At last count, he has kept all of his promises regarding adding whatever stimulus Europe needed to spur growth. He\u2019s just, generally, been slow to act. Europe\u2019s quantitative easing program essentially started when the U.S.\u2019s ended, though the programs should have been running at the same time. Better late than never and, this week, Draghi made it clear that the bank will do what\u2019s necessary to maintain its inflation mandate in order to also maintain its credibility. In a little under two months, ECB policymakers will meet to decide whether to continue the \u20ac1.5T bond-buying program and negative interest rates as mechanisms to stoke growth and inflation. I\u2019d count on it, and the extra liquidity has shown a tendency to flow to stocks.<\/p>\n

The Fed Takes a Pause<\/strong> – The Federal Reserve met Wednesday and decided to keep interest rates unchanged for now, which was largely expected. They may even stay put at the next meeting too as, in the past year, they\u2019ve shown a tendency to back-off of hawkish talk when the markets turn volatile.<\/p>\n","protected":false},"excerpt":{"rendered":"

Earnings Down, but Not Out \u2013 Q4 2015 results are in from 173 S&P 500 members, who combine for nearly […]<\/p>\n","protected":false},"author":1,"featured_media":4259,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[71,73],"tags":[],"class_list":["post-3060","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-private-client-group","category-steady-investors-week"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/3060","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=3060"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/3060\/revisions"}],"predecessor-version":[{"id":11461,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/3060\/revisions\/11461"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=3060"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=3060"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=3060"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}