What with everything going 0n, I wouldn’t be surprised if the start of earnings season next week has slipped your mind.
Reports of fourth quarter earnings are actually fairly important this year because stocks trade near all time highs and estimates say that fourth quarter earning will show a 3.7% year over year drop in the quarter, according to Zacks Research. That would mean that to maintain current stock prices, stock multiples, already stretched by rapid gains in share prices and relatively modest recent earnings increases, would have to stretch even more. Or that stock prices would need to retreat to reset at lower levels.
The biggest earnings loser in the quarter was the energy sector where earnings per share for the fourth quarter are projected to fall 42% year over year.
That big drop in energy earnings may actually be good news for stocks as a whole since 1) everyone expects energy earnings to fall big time, and 2) if the market wants to see the earnings picture as a glass half full, analysts and strategists can argue that the big drop in energy earnings means that earnings for other sectors are actually in pretty good shape.
Big banks will begin the earnings hit parade next week with reports on January 14, Tuesday, from JPMorgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC), all before the market opens for trading that day. Goldman Sachs (GS) will report on January 15 and Bank of America (BAC) will report on January 16.