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US logistics services company, FedEx, says the global economy is stalling, and it’s going to get worse next year. Current economic conditions are shrinking earnings at the world’s second-largest package delivery company.
But they are by no means the only ones to cut their outlook for global growth, while slashing forecasts for company earnings. Several countries in Europe are in recession and the U.S. is struggling with high unemployment and weaker manufacturing growth. That, combined with low estimates of the slowdown in exports from China, has left many US companies struggling.
Profit warnings are flying again. Negative third-quarter pre-announcements outweigh positive ones by more than four to one. That’s the worst showing since third-quarter 2009, when the U.S. was trying to pull out of the Great Recession.
Thomson Reuters analyst Jharonne Martis said, "This is mainly because of the European debt crisis, the slowdown in emerging markets in countries like China, and also the dollar has become significantly stronger and this has already hurt U.S. exports."
Not only did FedEx cut its forecast for the quarter earlier this month, but now it’s warning fiscal 2013 earnings will also be disappointing due to a weaker global economy.
Earnings estimates for the S&P 500 have continually dropped from a year ago and now stand at minus 2.1 percent. Five out of 10 sectors - including energy, materials and telecom - may post negative earnings growth.
Even on the positive side, technology is losing its luster. It’s posted the biggest number of negative pre-announcements and may only see a 2.6 percent increase in earnings growth.
But Michael Gayed, Chief Investment Strategist for Pension Partners, says there’s an extra element that may affect corporate results.
He said, "Expectations are being lowered just as you have global monetary shock and awe through the European Central Bank initiating unlimited bond buying, through the Federal Reserve with its QE3 program and with China also on the fiscal and monetary side likely to get more aggressive. That stimulus is just starting, so those expectations are probably considerably lower than what actual performance will be once that stimulus kicks in."
But there’s still a risk third-quarter earnings will disappoint investors, as companies continue to deal with the uncertainties of high unemployment, the elections and weakening global growth.
中国公众网摘编：GAN JADE |
