Lowered Expectations as Earnings Season Nears

The quarterly earnings season heats up in early July, but at least a handful of companies are expected to begin announcing that the soft economy has whacked them yet again.

“You really have to keep a look out and see how these earnings warnings go, or if they even occur,” said Charles Payne, chief strategist at Wall Street Strategies. “A lot of these tech companies closed the books [last week], so if we don’t get a lot of warnings then it could be a sign things are getting better.”

Analysts have lowered the bar for companies. They now expect earnings for companies in the Standard & Poor’s 500 to fall 12.2% for the second quarter compared with year-ago levels, according to research firm Thomson Financial/First Call. Just one month ago, analysts had forecast a decline of 6.3%.

Earnings are expected to fall 3.4% for the full year, compared with projections one month ago for no growth for the year. Last year, earnings growth for the S&P; 500 companies soared 17.4%.

“I don’t think the second-quarter pre-announcement period is going to be nearly as bad as what we saw in the first quarter,” said Jeff Kleintop, chief investment advisor at PNC Advisors, which oversees $70 billion.

Microchip maker National Semiconductor Corp. is one of the few companies expected to post its quarterly results this week. National Semi, slated to release results Thursday, warned in May of weak sales due to fewer orders in some markets. Reuters