Home page Company name and slogan

Custom Search
Investment Newsletters Best Fidelity Funds Best ETFs Get Free Reports 10-Year Journey Blog
MoneyMatters Logo

AlphaProfit MoneyMatters Investing Blog RSS Feed

Sam Subramanian

Sector Analysis: How Will Stocks Fare During the Q1 2016 Earnings Reporting Season?

Sam Subramanian PhD, MBA

Investor focus is now on corporate earnings.

Alcoa (AA) kicked off the first quarter 2016 earnings season after market close on April 11.

The aluminum producer earned 7 cents a share beating analysts' 2 cents a share forecast.

Alcoa however cut its 2016 growth estimates for global aerospace sales, aluminum demand, and heavy-duty truck & trailer production.

Investors were not impressed.

Alcoa stock lost 2.7% of its value the following day.

According to FactSet Research, analysts currently forecast S&P 500 companies to earn 9.1% less than they did in the year-ago period.

This is easily the weakest aggregate forecast since the financial crisis.
Sector Analysis: Earnings Growth Outlook by Sector in 1Q 2016

Sector Analysis: Earnings Growth Outlook by Sector in Q1 2016. FactSet Research data as of April 8, 2016.

Analysts expect growth in only three of the 10 sectors: telecom services, consumer discretionary, and health care.

They predict profits to fall in the remaining sectors including double-digit declines in financials, materials, and energy.

In many respects, first quarter earnings growth expectations by sector are quite similar to where expectations stood at a similar point for the fourth quarter. See: Sector Analysis: Will Q4 2015 Earnings Reports Bail Out Stocks?.

Profit growth in Q1 2016 is expected to be limited to the same sectors where profit growth was expected in Q4 2015 with one exception: the financial sector. Analysts expected profits for financials to grow 6.7% in the Q4 2015. In contrast, they expect the sector's profits to drop 10.9% in Q1 2016.

What's Ahead for Stocks

Companies have a history of beating quarterly earnings forecasts made at the start of the reporting season. Assuming earnings outperformance is inline with historical averages, first quarter earnings would be 5-7% below the year ago tally compared to expectations of a 9.1% decline.

If profits do drop in Q1 2016, as they look set to, this will mark the first time the S&P 500 index has seen four consecutive quarters of year-over-year declines in earnings since Q4 2008 through Q3 2009.

Stocks may very well rally during the Q1 2016 reporting season in the face of falling profits as they did during the Q4 2015 reporting season.

The rally is however likely to lose steam as investors question the appropriateness of pricing S&P 500 stocks at 16.7-times their forward 12-month earnings forecast particularly at a time when profit growth is proving elusive.

It may not be a bad idea to take a few chips off the table if the rally does materialize during the Q1 2016 earnings reporting season.

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 19.1%, a dollar invested in AlphaProfit's selection process in 1994 is now worth $49.17 while a comparable investment in the S&P 500 is worth just $6.82.

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.

Related Articles:
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
AlphaProfit MoneyMatters

By Hulbert #1 rank winner Dr. Sam Subramanian

'Incisive Insights, Impressive Results'   - Jim Woodruff

First Name:

Email Address:

We respect your privacy. We will not spam or sell your information to others, period.

Popular How-To Guides

Custom Search

Recent MoneyMatters Articles

More from Investing Blog Sign Up for Free e-letter

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 several times.

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 https://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.