April 1, 2008 / 6:45 AM / 12 years ago

U.S. earnings estimates fall further

NEW YORK (Reuters) - First-quarter U.S. earnings estimates have come down sharply since the quarter began as views on the economy have weakened steadily, analysts said.

First-quarter U.S. earnings estimates have come down sharply since the quarter began as views on the economy have weakened steadily, analysts said. REUTERS

Earnings for Standard & Poor’s 500 companies are now expected to fall 8.1 percent in the quarter that ends Monday, compared with the 5.5 percent decline projected last week.

At the beginning of the quarter, analysts projected 4.7 percent earnings growth during the period.

“It’s a reflection of people’s views on the economy, that economic growth is rapidly slowing, and that’s flowing through to the earnings estimates for corporate America,” said Giri Cherukuri, head trader at OakBrook Investments LLC, in Lisle, Illinois.

However, for the second quarter the profit outlook may show improvement, with forecasts being revised to a slight rise compared to a year ago instead of a fall.

Analysts have been closely watching payrolls data, among other indicators, for signs of economic weakness. For the Labor Department’s monthly jobs report, due on Friday, U.S. employers are expected to have cut payrolls for a third straight month. Economists polled by Reuters estimate a reduction of 58,000 jobs.

The reporting period for first-quarter earnings is expected to kick off next week with results from Alcoa Inc (AA.N).

For second-quarter earnings Reuters Estimates project growth of 0.3 percent for the quarter versus a projected decline of 0.9 percent a week earlier.

“I think we may see earnings estimates coming down some more, but, at end of the day, I think companies may still beat them,” Cherukuri said.

“Financials are the wild card, and I think those might be worse than expected,” he said.

Reuters Estimates is predicting the financial sector will suffer a 49 percent decline in quarterly earnings.

Consumer companies are expected to see their earnings decline 10 percent, as consumers continue to be pinched by rising food and energy costs and declining home values.

The overall projected rate combines figures for companies that have reported with estimates for companies that haven’t.

The energy and technology sectors are expected to post the healthiest results for the quarter, with respective gains of 33 percent and 12 percent, according to Reuters Estimates.

The challenging environment has led most companies to issue negative outlooks for the upcoming quarter. According to Reuters Estimates, companies have reported 242 negative outlooks, compared with just 169 positive forecasts.

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