Another earnings season kicks off tomorrow when Alcoa (AA) releases its Q1 earnings after the close, and unless you have been living under a rock (or a snow bank) for the last several weeks, you have no doubt either heard of or experienced the slowdown in economic activity during the first quarter. Due to a variety of factors including weather, lower energy prices, the stronger dollar, West Coast port closures, etc., companies have been cautious in their outlooks and that has led analysts to continue cutting already reduced earnings forecasts. As of last Friday, analysts had lowered forecasts for 392 more companies in the S&P 1500 over the last month than they had raised forecasts for over that same period. On a net basis, this difference works out to 26.1% of the stocks in the entire index. The chart below shows how this reading has changed over the last year, and the current reading is not far from its lowest levels. The only other period in the last year where we saw even more negative sentiment was in early February.
With companies and analysts lowering forecasts leading up to the Q1 reporting period, we put together a report for subscription clients that looked back at prior quarters over the last six years to see how the rate of analyst revisions leading up to earnings season has impacted the overall market and individual sectors. The report is loaded with interesting trends from both a positive and negative perspective depending on the sector in question, and is a must read ahead of what will soon be a deluge of earnings reports. Clients who have yet to see the report can click on the link below. If you are not currently a subscriber and would like to try out the service, sign up today for a no obligation free trial.