Earning season is almost done with 88% of all companies in the S&P500 having reported now for the second quarter of 2009. Earnings have declined over 98% since peaking in the third quarter of 2007.
Real earnings have dropped to a record low.
Why is this reality not captured by investors?
Because reported earning are beating the estimations set by various analysts. This is a relative performance. Versus expectations
But in absolute terms the situation is just horrendous.
Given the decidedly lackluster expectations, it’s relatively easy for a company to “outperform" those expectations. Secondly, much if not all of any gains in profitability are the result of slashing overhead (read "workers") and not a pick-up in sales. Finally, as you can see in the chart, in no sense are the earnings being posted anywhere remotely close to prior levels.
Real earnings have dropped to a record low.
Why is this reality not captured by investors?
Because reported earning are beating the estimations set by various analysts. This is a relative performance. Versus expectations
But in absolute terms the situation is just horrendous.
Given the decidedly lackluster expectations, it’s relatively easy for a company to “outperform" those expectations. Secondly, much if not all of any gains in profitability are the result of slashing overhead (read "workers") and not a pick-up in sales. Finally, as you can see in the chart, in no sense are the earnings being posted anywhere remotely close to prior levels.
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