Judging from the way that companies are celebrating the
earnings season, you'd think that the economy was back to
firing on all cylinders. Yet in reality, the only thing that
many companies are doing is beating analyst estimates that
already reflected the
huge contraction in the economy-- and if you're a
long-term investor, you shouldn't necessarily jump for
joy.
Jumping a three-inch hurdle
The disparity between beating estimates and showing
real earnings growthis especially clear in this quarter's
results. According to Bloomberg, over 85% of the companies
that reported their earnings last week beat analyst
estimates. Yet on average, the companies saw their earnings
shrink by 19% from last year's levels, marking two full years
of earnings declines. Those figures are roughly in line with
how well the entire earnings season has gone so far. Here are
some examples:
Stock
2009 Q3 Estimate
Actual Reported Earnings
Change from Last Year's Earnings
Caterpillar (NYSE: CAT)
0.06
0.64
(54%) Continued... |