Sector Analysis: Will Q4 2015 Earnings Reports Bail Out Stocks?
Sam Subramanian PhD, MBA
Volatility has erupted in global stock markets in the first week of 2016.
Fears of slowing growth in China, rising political tension in the Middle East and North Korea, and deteriorating solvency of oil & gas producers are weighing on stocks.
The U. S. December jobs report has soothed investor's growth and inflation concerns.
Now, the moment of reckoning for U. S. companies is here.
January 11 marks the unofficial start of the fourth quarter earnings season. Aluminum producer Alcoa reports after market close on this day.
According to FactSet, analysts have been steadily chopping Q4 earnings forecasts since the second half of 2015.
In late June 2015, they forecasted Q4 EPS to grow over 4.0%.
They now expect S&P 500 company earnings to decline 5.3% from the year-ago period. The culprits: stronger dollar, lower oil prices, slower global economic growth, and higher wages.
Earnings are forecasted to increase in only four of the 10 sectors. They are consumer discretionary, financials, healthcare, and telecommunications services.
In comparison, earnings grew in five sectors during the third quarter with information technology joining the above cohort.
Sector Analysis: Earnings Growth Outlook by Sector in Q4 2015. FactSet Research data as of January 8, 2016.
In Q4, analysts expect double-digit earnings growth only in telecom services.
They forecast energy sector's earnings to decline a whopping 67.7% due to the sharp drop in oil & gas prices from a year-ago.
If earnings for S&P 500 companies decline in Q4 as predicted, it will mark the third straight quarter of negative year-over-year quarterly earnings comparisons.
The last time S&P 500 companies posted three consecutive quarters of year-over-year declines in earnings was in 2009.
While low earnings expectations can set the stage for companies to outperform them and help their stocks rise during the reporting season, this reasoning may not bail out stocks this time.
The complication stems from 2016 earnings expectations.
Analysts currently project S&P 500 companies to grow earnings 7.4% in 2016 after a 0.7% decline in 2015.
Will companies provide 2016 earnings guidance to imply at least 7.4% growth in this global macroeconomic milieu?
The odds do not look good.
AlphaProfit's Investment Selection Process
You need a time-tested, proven investing strategy to protect and grow your money in this challenging market.
To increase the odds of selecting winning sector ETFs & selecting winning Fidelity Select Funds, AlphaProfit evaluates sectors on valuation, momentum, and news quality with EPS growth being one of the news quality metrics.
This multi-factor analysis ensures investments in the chosen sector are attractively priced and have the catalysts needed to sustain growth in future.
Fully 75% of investments selected by AlphaProfit have made money ... and this includes results during the 2008 financial crisis and the dot-com bust at the turn of the millenium.
The high percentage of winning investment selections translates into lower risk and higher return for AlphaProfit Premium Service investment newsletter subscribers.
AlphaProfit has recently reconstituted its Fidelity and ETF model portfolios for the evolving market milieu.
AlphaProfit's Free Investment Newsletter MoneyMatters
Compounding at an annual rate of 19.2%, a dollar invested in AlphaProfit's selection process in 1994 is now worth $47.78 while a comparable investment in the S&P 500 is worth just $6.73.
Consistent selection of winning mutual fund picks has enabled AlphaProfit's Premium Service to rank #1 in Hulbert Financial's investment newsletter rankings multiple times.
Sign up for AlphaProfit's FREE investment newsletter MoneyMatters and get two special reports:
Five Smart Ways of Using Fidelity Select Funds and Avoid Three Common Mistakes ETF Investors Make.
Sector ETFs: Invest in the Best Sector ETF Consistently
Fidelity Select Funds: Choose the Best Fidelity Sector Fund Consistently
AlphaProfit Free and Premium Investment Newsletters
Protect & grow your wealth with
investment recommendations from free e-letter
By Hulbert #1 rank winner Dr. Sam Subramanian
'Incisive Insights, Impressive Results' - Jim Woodruff
About AlphaProfit MoneyMatters and AlphaProfit
AlphaProfit MoneyMatters is a free e-letter distributed to registered users of AlphaProfit's website. The e-letter analyzes the economy, markets, and sectors and provides money-making insights on stocks, exchange-traded funds, and mutual funds.
AlphaProfit MoneyMatters is edited by Dr. Sam Subramanian acclaimed for his financial acumen and analytical skills.
AlphaProfit Investments, LLC is an independent investment research firm based in Sugar Land, TX. AlphaProfit publishes the AlphaProfit Sector
Investor's Newsletter, edited by Dr. Sam Subramanian. Leveraging sector funds, the Newsletter provides high-performance model portfolios
with Fidelity funds and exchange-traded funds.
It also includes actionable stock recommendations. This newsletter features among MarketWatch's top 10 investment newsletters and has won
the coveted #1 rank from Hulbert Financial
Copyright Policy and Fair Use Guide
You are welcome to quote a short excerpt of the article not exceeding 100 words with attribution in the form of a hyperlink to the article's
full URL or http://www.alphaprofit.com. If you wish to republish the article in full on
your website, blog, or other media, you must obtain permission.
AlphaProfit MoneyMatters™ is for information purposes only. Nothing herein should be construed as an offer to buy or sell securities or to give individual advice on investing. Factual material is obtained from sources believed
to be reliable and is provided without warranties of any kind. AlphaProfit Investments, LLC is not responsible for any errors or omissions. AlphaProfit Investments, LLC neither is associated with nor receives any compensation from any
of the investment companies, brokers or entities connected with the securities mentioned herein. Please review our Terms and Conditions of Use and Subscriber Agreement which is available on our website at
www.alphaprofit.com; they govern your relationship with AlphaProfit Investments, LLC, including, but not by way of limitation, use of the AlphaProfit MoneyMatters.
This page is best viewed in 1024 by 768 pixels screen resolution or higher.
Copyright © 2016 AlphaProfit Investments, LLC. All rights reserved.