Data Suggest an Earnings Turnaround

Adding to the evidence of a possible economic turnaround, the percentage of corporations issuing quarterly earnings warnings is down sharply from the first three quarters of 2001, according to earnings tracker Thomson Financial/First Call.

Of the 6,000 companies that First Call surveys, 1,025 had made preannouncements of some sort as of Tuesday, and of those, 462, or 45%, were negative, indicating that profits or revenues would fall below the expectations of Wall Street analysts.

By contrast, at this point in the first quarter of 2001, negative preannouncements were running at 68% of the total, in the second quarter they were at 65% and in the third quarter 61%, First Call analyst Steve Rigo said.

“I see that as a definite positive,” Rigo said.

To be sure, there is as yet no turnaround in the earnings recession that has been weighing on corporate America all year. Fourth-quarter profits for Standard & Poor’s 500 firms were expected to be 19% below those for the fourth quarter of 2000, Rigo said.

Still, First Call considers its preannouncement tallies to be an indicator of trends in actual earnings. Thus, a decline in warnings could presage a real earnings improvement next year, Rigo said.