Terrible Revenues, Terrible Earnings … and There’s More Coming
By John Jagerson and Wade Hansen
Editors, SlingShot Trader
This earnings season we knew we were going to have to keep an eye on top-line revenues — especially for those companies doing a lot of business overseas. They were terrible last quarter, and they had a high likelihood of being terrible this quarter. The only saving grace last quarter was the ability to squeeze better margins out of worse-than-expected revenues to generate better-than-expected earnings and the expectation of QE3.
Well, this quarter, there’s no new QE to hope for, and companies continue to report disappointing top-line revenues with equally disappointing bottom-line earnings. Plus, companies have been downgrading their outlook for the future.
So let’s put all of that together:
- companies continue to struggle to generate growth in top-line earnings;
- management teams seem to have hit their limit in how far they can cut costs and improve margins to generate decent bottom-line earnings out of lackluster revenues;
- the outlook for the near-term future is grim with China, Europe and economies around the world slowing down; and
- nobody is expecting the Fed to do anything new — on top of the $85 billion that it is injecting into the system each month, that is — anytime soon.
The Q3 earnings season has been a bust, and it doesn’t look like Q4 is shaping up to be much better. Unless the U.S. Congress is able to avoid the Fiscal Cliff and management teams start raising their outlook for the future, we could be in for some rough times ahead.