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AAA  Feb. 27, 2013
Dark clouds?
by Jonathan Fahey
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The earnings outlook for corporate America suddenly doesn’t look so great.

More companies than usual are advising investors to lower their expectations for the first quarter. And financial analysts are listening: Their forecasts for earnings growth have fallen steadily and now average 0.7 percent, according to S&P Capital IQ. At the beginning of the year, analysts expected earnings to grow almost 3.7 percent in the first quarter. Earnings grew at an average pace of 4.5 percent in 2012.

There are a few factors to blame. Businesses are nervous about the latest government gridlock that could lead to automatic spending cuts. Also, the end of the Social Security tax holiday, delayed income tax refunds and higher gasoline prices are sapping spending money.

Wal-Mart offered a dreary outlook for the first quarter even as it reported strong earnings growth last quarter. The same was true at Nordstrom, which caters to more affluent customers.

Twelve companies in the consumer discretionary sector – which includes everything from restaurant chains to clothing companies – have shared their outlook for the first quarter. Of those, 10 have offered earnings guidance lower than what analysts had expected, according to FactSet.

The silver lining: Earnings growth is expected to rebound fast later in the year – to 7 percent in the second quarter and 9 percent in the third.

Associated Press
Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.