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Expect 33% Earnings Increase in 2010: S&P’s Sam Stovall

Published: Thursday, 5 Nov 2009 | 1:26 PM ET

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By: JeeYeon Park
CNBC News Associate

Many companies have reported impressive third-quarter earnings results, but expect better numbers next quarter, said Sam Stovall, chief investment strategist at Standard & Poor’s. He shared his fourth-quarter outlook with CNBC.

“Third-quarter [earnings] were better than expected but it really was a continuation of 'less bad is good' because we still had a year-over-year decline in operating results of about 4 percent,” Stovall told CNBC.

“But earlier on, we had expected a 9 percent decline.”

Stovall said the materials sector posted a decline of 40 percent instead of the expected 70 and the technology industry ended up posting a gain of 2 percent versus an earlier estimate of a 9 percent decline.

“But revenues are still lagging with a 10 percent year-over-year decline,” he said.

Stovall said the biggest disappointments from the third-quarter were the telecom and industrial sectors.

“Industrials were expected to lose 35 percent, but they ended up losing 40, so it’s still a very challenging time for the industrials," he said.

"Telecom was the biggest surprise because they were expected to show a year-over-year increase, but they’re likely to show a year-over-year decline—they’re not getting the traction that was expected.”

“Next quarter, [the results] will actually be better,” said Stovall. “What we’re seeing is that there is a turnaround in earnings in the fourth quarter. S&P analysts are expecting about a 33 percent increase in earnings next year driven primarily by the cyclical sectors—in particular, financials, consumer discretionary, energy, materials and tech.”

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