Lower Earnings Forecasts Seen as Sign of Slowdown

At least nine U.S. companies have lowered their earnings forecasts this week, making Wall Street jittery and heightening concern over a slowing economy.

The best-known company to deflate analysts’ optimism was Avon Products Inc., the New York cosmetics giant that said both 1989 and 1990 earnings would be below expectations. It blamed soft U.S. sales and a stronger-than-anticipated dollar, which reduced its revenue from foreign units.

Avon’s announcement followed Stratus Computer Inc.’s surprise lower third-quarter forecast Monday, which caused its stock to fall $7.50 a share to $26.50.

Stratus, a maker of fault-tolerant computer systems, cited a weak domestic market as a reason for the profit shortfall.

Sounding Warnings

The earnings downgradings are “a sign of not having the growth now that we had six months ago, or a year ago,” said John McElroy, principal of 1838 Investment Advisors L.P.

The government’s revised second-quarter gross national product figure, to be announced today, is expected to show a 2.7% rise for the second quarter, unchanged from its previous figure.

But two reports released this week indicate that the third-quarter pace may be slower. August consumer prices were unchanged for the first time in three years, and housing starts dropped a surprising 5%.

A number of smaller companies scattered across various industries have sounded warnings about earnings. Apart from Stratus, computer concern Landmark Graphics Corp., noting uncertain demand for its computer systems for industrial uses, revised downward its first-quarter earnings expectations.

Two financial services firms, Peoples Westchester Savings Bank and Amcore Financial Inc., cited slower loan demand as reasons for their lowered outlook.

Gas systems operator Valero Energy Corp.; Utilicorp United, an electric utility; Square D Co., an equipment company, and Arco Chemical Co. rounded out the list.