With about 20 percent of S&P 500 companies having reported third-quarter results, market watchers are beginning to wonder if the streak of 11 consecutive quarters of growth is ending.
So far the signs are not instilling confidence. Overall performance for the 98 S&P companies that reported as of Friday is the lowest since the disastrous first quarter of 2009 following the mortgage crisis that sent the country into recession. In other words, more of the country’s largest companies have either squeaked by or failed to meet expected earnings estimates, according to FactSet. These 98 companies have a combined negative earnings growth rate of 2.3 percent.
Forest Laboratories, Inc. (NYSE:FRX), a New York based pharmaceutical company that beat analysts’ consensus of a one cent decline in earnings per share by posting an eight-cent gain in its fiscal third quarter. This has been the largest surprise so far this season, but the company’s EPS was down starkly from the 91 cents per share the company reported in the same quarter last year. It lowered its EPS guidance to between 45 and 60 cents for 2013, down from the I/B/E/S estimate of 66 cents, due largely to competition from cheaper generic drugs.
The S&P Index has gained over 13 percent since the start of the year, peaking at $1,465.7 on Sept. 14. The index has declined by 2.7 percent since that year-to-date high, but is still much higher than the 10-year low of $683.38 struck on March 6, 2009.
Here are some other big players inside and outside of the S&P 500 that have signaled a slowdown for the near future:
Caterpillar Inc. (NYSE: CAT), the giant maker of construction and mining equipment from Peoria, Ill., announced Monday it was lowering its EPS for a second time this year. It now expects $9 to $9.25 per share this year, down from the average analysts’ average expectation of $9.41. The company, whose sales are a key indicator of global performance since its equipment is used in construction, said it expected sales to be about the same next year, the slowest rate since the last recession four years ago.
Electrolux AB (ADR: ELUXY), the Swedish maker of household appliances, and Koninklijke Philips Electronics NV (AMS: PHIA), the Dutch maker of consumer electronics and lighting, both said they expected the U.S. market for home appliances to cool. Electrolux reduced its growth estimate for this segment by three basis points, from 2 percent growth to negative 1 percent. The sales rate of home appliances is an important indicator of U.S. consumer sentiment.
Both McDonald's Corporation (NYSE: MCD) and General Electric Company (NYSE: GE) rattled nerves last week and these two bellwether stocks reported disappointing earnings in the third quarter. The Oak Brook, Ill., quick-service restaurant giant doesn’t issue guidance estimations, but its same-store sales performance in recent months, including July’s, which was the worst in nine years. Quarterly same-stores sales, an important indicator of growth, were 1.9 percent in the third quarter, down from 6.6 percent last year. General Electric lowered its sales forecast for 2012 from 5 percent to 3 percent, citing considerable slowdown in its finance division, GE Capital.
Federal-Mogul Corporation (Nasdaq: FDML), an auto parts manufacturer based in Southfield, Mich., reported on Friday a third-quarter loss of 11 cents per share and said it would lay off hundreds by the end of the year, mostly in Europe. The company has announced it is preparing for slower growth in markets besides Europe.
To contact the editor, e-mail: