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Top Line Trouble – Disappointing Revenue an Ominous Signal, Broadly

From tech and industrials to energy and more, the Fast Money pros have spotted a trend this season.

Whether companies in these sectors beat on earnings or not, a growing number of them seem to be missing revenue estimates.

Oil company Kinder Morgan is among the quarter’s biggest losers in this category missing revenues by 13%. But they’re hardly alone – take a look:

Company Revenue (actual) Revenue (expected)
Domino's $376M $388M
UPS$13.35B 13.7B
Illinois Tool Works$4.66B $4.86B
AT&T$31.6B $31.7B
Lexmark$921M $941M
Whirlpool$4.51B $4.63B
DuPont $11B$11.27B
Texas Instruments$3.34B $3.35B
Eaton$4.1B $4.3B

What should you make of the trend?

"Revenue is very important," explains pro trader Stephen Weiss. "Macro leads fundamentals in the market and lower than expected revenue says to me the macro condition continues to deteriorate."

Trader Steve Grasso agrees. “For me weaker than expected revenue from UPS is the canary in the coal mine (because UPS delivers such a wide range of products and merchandise to homes and businesses.)"

Grasso takes it as a sign the economy can't gain a foothold. And Grasso believes his negative outlook is confirmed by the latest economic data, "From factory activity to jobless claims, it's all terrible.”

Trader Guy Adami adds that the market doesn’t like beats with revenue misses. He explains that’s because it suggests that, “at some point companies will run out of runway.”

In other words, lower than expected revenue is a sign that sales are sluggish. “The market needs to see sales growing. That’s why the S&P is trading lower.”

Trader Pete Najarian sees it differently. He says the beats are equally important because it’s a sign that corporate America is able to stay efficient and navigate the relatively weak economy. “I think it’s keeping the S&P afloat.”



Posted by CNBC's Lee Brodie

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Trader disclosure: On July 24, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders Guy Adami is long C; Guy Adami is long GS; Guy Adami is long INTC; Guy Adami is long AGU; Guy Adami is long MSFT; Guy Adami is long NUE; Guy Adami is long BTU; Steve Weiss is long EUO; Steve Weiss is long WLP; Steve Weiss is long QCOM; Steve Weiss is short X; Steve Weiss is short AKS; Steve Weiss is short JCP; Pete Najarian is long AAPL; Pete Najarian is long BAC CALLS; Pete Najarian is long C; Pete Najarian is long JPM CALLS; Pete Najarian is long INTC; Pete Najarian is long SBUX; Pete Najarian is long FB; Pete Najarian is long MSFT; Steve Grasso is long ASTM; Steve Grasso is long BA; Steve Grasso is long D; Steve Grasso is long FRO; Steve Grasso is long LF; Steve Grasso is long LNG; Steve Grasso is long MHY; Steve Grasso is long MO; Steve Grasso is long PFE; Steve Grasso is long S; Steve Grasso is long VLO; Steve Grasso is long XLU

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