The Street is worried about earnings, and that's a good thing

Pisani's market open: Earnings warning season

The list of companies with earnings warnings is growing. SanDisk lowered its outlook Thursday, and overnight regional freight railroad company Genesee & Wyoming also guided lower on revenue forecasts. Not surprisingly, the company said traffic was suppressed due to severe winter weather and also cited weakness in commodities like metals and steam coal.

It's been an especially ugly weak for transports, down 5 percent and far away the worst major performer with worries about weaker economic data and poor commodity traffic dragging them down. Earlier this week, Kansas City Southern also gave disappointing guidance for the quarter, citing soft demand among energy customers.

Railroads this week:

  • Kansas City Southern: down 10.9 percent
  • Union Pacific: down 7.9 percent
  • Norfolk Southern: down 5.9 percent
  • CSX: down 5.4 percent

It's certainly true this is the season for warnings.

The best piece of news is that the entire Street—including the analysts—is fully engaged with the idea there is a bit of an "earnings recession" going on, and not just in energy, which is clearly a debacle.

Q1 2015 earnings (est.):

  • Energy: down 63 percent
  • Materials: down 5 percent
  • Utilities: down 4 percent
  • Telecom: down 3 percent
  • Consumer staples: down 1 percent

Five of the 10 S&P 500 sectors are showing negative earnings growth. This is good news because it is putting pressure on analysts to take numbers down, which is increasing the chances they will overshoot.

Right now, first-quarter earnings are expected to be down about 3 percent. If estimates stay there, my bet is earnings will end up being slightly positive, thus avoiding a first quarter of negative earnings growth since 2009.

Financials (up 10 percent) and health care (up 9 percent) are the only two sectors with robust earnings growth, though industrials and consumer discretionary also have modest mid-single-digit growth.