World Business
US frims' confidence improves
(Agencies)
Updated: 2010-04-09 15:43
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Corporate confidence improves
Dow component Alcoa Inc kicks off the reporting period with results after Monday's close. Results are also expected next week from tech heavyweights Intel Corp and Google, as well as from General Electric.
Pre-announcements heading into the reporting period show more positive outlooks than average and fewer negative ones, indicating company executives feel confident about results and analysts' estimates.
The negative-to-positive pre-announcement ratio is at 1.3, well below the long-term average of 2.1, said John Butters, director of US earnings for Thomson Reuters.
The news follows a strong fourth quarter in which 9.7 percent of companies raised outlooks and 5.2 percent lowered outlooks -- the widest spread since 2001 -- in another sign of improved confidence, according to Bespoke.
First-quarter revenue is seen rising 10 percent, which would be an improvement from 8 percent growth in the fourth quarter, Thomson Reuters data showed.
While drastic cost cutting has let a much higher-than-average percentage of companies beat analysts' earnings estimates in recent quarters, revenue has been slower to recover.
But some 70 percent of S&P 500 companies beat revenue estimates for the fourth quarter -- up from 59 percent beating estimates for the third quarter.
On earnings, 72 percent of companies beat estimates, down from a record 79 percent in the previous quarter but still well above the 61 percent in a typical quarter, Thomson Reuters data showed.
Signs of a healthier economy
The improved economic outlook is driving higher expectations. Non-farm payrolls added jobs in March, according to government data released on Good Friday, while another report this week showed the huge US services sector grew at its fastest pace in nearly four years.
On Thursday, retail chains posted a record rise in monthly same-store sales for March.
"If you look at the stocks (of high-end retailers) ... they kind of indicate spending has come back. We definitely saw it in the fourth quarter," said Wall Street Strategies analyst Brian Sozzi in New York.
Shares of Tiffany's are up 192 percent since the S&P 500's 12-1/2-year closing low hit on March 9, 2009.
Many S&P sectors are still benefitting from easy year-over-year comparisons, Butters said.
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What a difference a year makes.
Sectors expected to lead this year's first-quarter gains are financials, estimated to have a 205.2 percent jump in earnings from a year ago, followed by materials, seen posting a 176.4 percent rise, and consumer discretionaries, estimated to report a 114.8 percent gain.
"There have not been a lot of profit warnings. I think the markets are expecting good things," said Nick Kalivas, vice president of financial research and senior equity index analyst at MF Global, in Chicago.
