Oct. 22 - Earnings may look good on the surface- but companies are not bringing in as much money as expected in sales, leading numerous warnings the future. Bobbi Rebell reports.
Despite signs of improving health- The U.S. economy is still far from cured. While earnings have been beating forecasts- S&P Capital IQ's Sam Stovall is not impressed: SOUNDBITE: SAM STOVALL, CHIEF EQUITY STRATEGIST, S&P CAPITAL IQ (ENGLISH) SAYING: "Let's face it. The bar was set very low to begin with. Actually you could claim that it was underground because we were expected to see almost a 2 percent decline." So far, about 60 percent of the S&P 500 companies that have reported results have topped analysts' earnings expectations. But 61 percent have missed revenue forecasts. And while 20 companies have warned fourth-quarter results would be below analyst estimates, not a single company has raised fourth quarter guidance. Monday, Caterpillar beat earnings forecasts- but slashed its 2012 forecast for the second time this year, and warned on 2013 as well. It says that the global economy is slowing faster than expected. Decision Economics Cary Leahey says Caterpillar is part of a broader trend: SOUNDBITE: CARY LEAHEY, CHIEF U.S. ECONOMIST, DECISION ECONOMICS (ENGLISH) SAYING: "It's really reflective of the slowing global environment. So a year ago average export growth in the economy was up 10-15 percent Now it's plus 3, plus 4 and its probably turning negative. So if you are exposed internationally and you are exposed to the countries that are slowing down a lot or are going in a double dip like Europe, you are taking it on the chin and that's what the earnings are telling us." But investors have been getting conflicting signals- from robust economic data to bleak company outlooks. And they are getting skittish. But Stovall sees opportunity: SOUNDBITE: SAM STOVALL, CHIEF EQUITY STRATEGIST, S&P CAPITAL IQ (ENGLISH) SAYING: "When you think about all the negative news that has been going on out there the S&P is still only down about 2-1/2 percent from its recovery high that we saw on September 24th so you would think that if mentioned to me that these big companies would be missing in terms of either earnings or revenues and the market is still down less than 3 percent that would imply to me that there is an awful lot of resiliency out there and once some of these uncertainties get taken away then investors probably want to push this market even higher." And earnings season is far from over. After the bell on Monday, Yahoo reported earnings and revenue that were both better than forecasts.