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Many Earnings Beats—But No Strong Q4 Guidance

Bob Pisani is off; this post was written by CNBC producer Robert Hum.

Stocks are trading lower Tuesday, as the dollar strengthened, following China’s surprise announcement that it will raise interest rates by 25 basis points.

The Dollar Index is having its best day in over 2 months, and that’s causing most metals and energy commodities to fall 2 percent and has put many commodity stocks under pressure in trading this morning:

Rio Tinto down 5 percent,

BHP Billiton down 3 percent,

Newmont Mining down 4 percent,

Freeport-McMoRan down 2 percent,

Alcoa down 2 percent,

U.S. Steel down 2 percent.

Many Earnings Beats, But Stocks Down Absent Strong Q4 Guidance

A number of companies reported stronger-than-expected earnings in the last quarter, but that’s not generating much enthusiasm from traders. Why is that the case? Some companies saw fairly tepid revenue growth (either merely inline or even below expectations — continuing a bit of trend from the last few days), while others failed to blow away earnings expectations in their guidance for the current quarter.

Don’t be fooled too…although a few companies did raise their earnings outlook for the year, traders noticed that much of that strength came as those companies rode the coattails of a strong first 9 months of the year – not because of expectations to a robust finish to the year.

Take a closer look at some of the outlooks provided in the last 24 hours:

IBM earnings came in ahead of estimates ($2.82 vs. $2.75 consensus), but its service contract signings disappointed investors. Nonetheless, Big Blue raised its full-year guidance to “at least” $11.40 vs. $11.29 consensus, but thanks to 3 strong quarters so far this year, that only implies Q4 earnings of “at least” $4.00 — essentially inline with what the Street has been expecting.

Remember, IBM is the largest-weighted stock in the Dow, and its declines today are bringing down the index about 40 points (about one third of the Dow’s total losses today).

Johnson & Johnson handily beat estimates ($1.23 vs. $1.15 consensus), but sales for the Dow component fell a bit short of expectations. Higher international sales (up 1.1 percent) were offset by declines in the U.S. (down 2.5 percent).Consumer sales were also hit hard, falling 10.6 percent (led by a 24.5 percent decline at home), while pharmaceutical sales up a modest 4.7 percent.

Although full-year guidance was raised to $4.70-$4.80 (mostly above $4.70 consensus), that implied fairly conservative Q4 guidance of $0.97-$1.07 vs. consensus of $1.05.

UnitedHealth saw its earnings soar above expectations ($1.14 vs. $0.84 consensus) as enrollment in Medicare and Medicaid grew while medical expenses fell. The healthcare firm raised its full-year outlook to $3.85-$3.95 way above $3.60 consensus. But that guidance implies Q4 earnings of $0.69-$0.79, essentially inline with Street estimates of $0.75.

Illinois Tool Works had a pretty stellar report. The industrial product maker beats earnings estimates by a penny amid higher margins and an 11 percent rise in organic revenues. Demand was particularly strong from its power systems/electronics and welding/industrial packaging customers.

Q4 earnings guidance was just inline with expectations ($0.74-$0.82 vs. $0.79 consensus) although revenues are now seen growing 7 percent-9 percent vs. up 6.5 percent consensus.

Lockheed Martin’s bottom line beat estimates $1.55 vs. $1.53 consensus), but the defense company saw weaker-than-expected revenue growth. More troubling was the firm’s outlook. It lowered full-year earnings for this year to $6.75-$6.95 (below $7.08 consensus) and warned that 2011 sales could be pressured by contract delays and cancellations.

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  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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