Hopes rise over Q4 earnings

NEW YORK: A year that started in gloom and doom could end in cheers for US corporate profits and leave the stock market positioned for a strong start to 2010.

Analysts have been forecasting a big jump in fourth-quarter earnings compared to a year earlier, when the entire Standard & Poor's 500 index ended in a per-share loss.

Expectations for the fourth quarter have jumped even further, as four out of five companies have exceeded forecast results in the third quarter.

S&P companies now are expected to show a gain of 205 percent from a year ago, compared with early October estimates for a gain of 193 percent, according to John Butters, director US earnings at Thomson Reuters.

The S&P as a group is expected to earn $17.10 a share in the fourth quarter, compared with an estimate of $16.52 at the start of the month, he said.

While some companies may be experiencing a rebound, the biggest element in the spectacular increase is last year's abysmal performance when the economy was in the depths of the recession, analysts said.

More upward revisions could be ahead, they said.

"Assuming that our economic forecast for continued recovery proves valid, there seems to be room for these future expectations to move higher," analysts at PNC Financial Services Group in Philadelphia said in a note.

"The earnings outlook continues to be supportive of stocks."

A stronger economy signals a stronger corporate America. The S&P index is up 57 percent since its lows in early March, with the market responding favorably to both upbeat earnings news and economic data.

The economy grew faster than expected in the third quarter, expanding at a 3.5 percent annual rate, gross domestic product data showed on Thursday. The report suggested the economy is emerging from its recession.

The fourth quarter is expected to mark the first quarter that S&P 500 company earnings grew year-over-year since the second quarter of 2007.

So far in the third quarter, some 81 percent of S&P companies have beaten earnings expectations, well ahead of the 61 percent in a typical quarter, and a new record, Butters said.

Reuters

(China Daily 11/02/2009 page11)