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)|
|Illinois Tool Works||$4.66B||$4.86B|
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.”