What to look for as earnings season starts up

Earnings outlook

With growth expected to be modest, third-quarter corporate profit reports are likely to be more interesting for what they say about the future than the present.

Analysts expect companies to report earnings of barely more than 3 percent—a far cry from estimates that were closer to 10 percent at the beginning of 2013.

Yet hope remains that the months ahead are when corporate America turns the corner, moving from the steady but modest growth of the past several years and into a much stronger acceleration.

Specifically, analysts expect the fourth quarter to bring 9.6 percent profit growth. While that's also a huge drop from projections that were close to 18 percent at the beginning of the year, it's still well ahead of the 5.7 percent for the full year, according to S&P Capital IQ.

Those forecasts may have a ways to fall, though, according to reports from a variety of Wall Street analysts.

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"Higher energy prices, a stronger dollar and continued uncertainties emanating from Washington will keep Q3's growth to a low single-digit pace and could moderate forward guidance," said Sam Stovall, chief equity strategist at S&P Capital.

"So while Q3 EPS of 3.5 percent seems to be attainable, in our view, questions remain about the likelihood of seeing a near-10 percent growth in earnings in the final quarter of the year, not to mention the 11.2 percent increase projected by Wall Street analysts in the year ahead."

Indeed, companies will have to climb quite a wall to reach the current profit goals.

For that reason, forward guidance is likely to play a crucial role in how the market interprets the earnings results.

Heading into the third quarter, companies have guided negatively by a 3-to-1 ratio, ahead of the historical average. Though earnings season is still young, just 51 percent of the 21 companies that have reported are ahead of estimates.

Downbeat forecasts, then, could have a ripple effect as investors try to determine whether the 18 percent stock market rally so far this year is sustainable.

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CEOs have a "tendency to underpromise and overdeliver," said Sheraz Mian, research director at Zack's Investment Research.

"Current estimates for Q4 represent a material growth ramp-up of almost 9 percent, the starting point of the long hoped-for resumption in earnings growth," Mian said. "I have been skeptical of estimates for Q4 and beyond, and expect them to come down. We will find out in the coming weeks if we will get another round of estimate cuts or something different."

Companies have placated investors' hunger for growth by using the $1.8 trillion on their collective balance sheet for share buybacks.

(Read more: Reluctantly, market faces a real default threat)

True to form, the current $4.5 billion in share repurchases per day, boosted by Microsoft's $40 billion, is a record, according to market data firm TrimTabs.

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"While this has worked out pretty well for shareholders thus far, it is a potential hindrance to further growth," said Strategas analyst Jason Trennert. "Unfortunately, it appears as if there is a bear market in policies around the world designed to encourage capital formation and risk-taking."

Ultimately, the earnings period could kick off a time when investors will have to get more selective.

Though the financial sector is expected to be only one of 10 sectors in the S&P 500 to report negative earnings growth, Savita Subramanian, equity and quant strategist at Bank of America Merrill Lynch, recommends financials as a place to look for upside surprises. The firm also backs health care, and it's sour on telecom and materials.

Beyond that, investors may want to consider companies doing business outside of the U.S., which has seen outsized gains while much of the rest of the world has lagged.

(Read more: Companies are stashing billions overseas)

"In fact, the earnings revision ratio for multinationals is now at its highest level in 16 months, while pure domestics have seen revisions decelerate," Subramanian said. "We expect more multinationals can beat expectations this quarter, particularly given trends we have observed out of Europe."

Closer to home, the hope is that U.S. companies can turn the tide from increasingly reserved expectations.

"Analyst estimates seem particularly conservative versus both incoming data as well as economist forecasts," said Jonathan Golub, chief U.S. market strategist at RBC Capital Markets. "We believe this should drive positive surprises over the next several quarters."

—By CNBC's Jeff Cox. Follow him on Twitter @JeffCoxCNBCcom.