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Early earnings warnings cast a shadow on economy

Pedestrians walk past a Burberry Group Plc store
Xaume Olleros | Bloomberg | Getty Images

The bullish outlook for the U.S. may be undermined by negative earnings warnings this week in nearly every sector of the domestic economy.

In the past 24 hours there were shocking misses and guidance cuts from major companies in the health-care, technology, internet, consumer discretionary and retail industries due to higher operating expenses and poor end-market demand.


Luxury goods

The CEO of Burberry stated the company was seeing uneven demand in the U.S.

The luxury goods maker missed sales estimates, reporting 2 percent growth versus the consensus of 8.7 percent, according to StreetAccount.

"The external environment became more challenging during the half, affecting luxury consumer demand in some of our key markets." — Christopher Bailey, Burberry chief executive officer in the first half earnings report

Burberry traded down 10 percent in London Thursday morning.

Health care

HCA, the hospitals operator, missed earnings by 5 cents on higher labor costs.

"Labor costs increased as a percent of revenues to 46.9 percent compared to 45.7 percent in last year's third quarter. This increase was driven primarily by less productivity and a greater use of contract labor to fill staffing needs." — HCA earnings press release

HCA shares traded down 7 percent Thursday midday.

Technology

Seagate, the hard-drive maker, missed its own gross profit margin forecast of 27 percent by 3 percent.

"The difference in the company's non-GAAP gross margin from its forecast was driven primarily by lower-than-expected intra-quarter demand for the company's 4 terabyte and 6 terabyte nearline hard drive products." — Seagate earnings preannouncement

Seagate shares are down 15 percent Thursday midday.

Retail

Wal-Mart projected a 6 to 12 percent decline in earnings for the next fiscal year, much lower than the 4 percent rise expected by Wall Street.

"Fiscal year 2017 will represent our heaviest investment period. Operating income is expected to be impacted by approximately $1.5 billion from the second phase of our previously announced investments in wages and training as well as our commitment to further developing a seamless customer experience" — Wal-Mart press release

Wal-Mart fell 10 percent on Wednesday, the largest daily decline for the world's largest retailer since 1988.

Consumer discretionary

Garmin guided full-year earnings to $2.25 compared to prior guidance of $2.65.

"Given the global economic environment, revenue growth has proven difficult to generate in 2015, while gross margin has been weaker than our forecast due to geographic revenue mix and a competitive pricing environment in certain product categories." — Cliff Pemble, chief executive officer of Garmin in third quarter pre-announcement

Garmin shares are down 13 percent Thursday midday.

Even the best performer in the S&P 500 year-to-date up 108 percent, Netflix, disappointed investors by missing domestic subscriber estimates by 300,000 on Wednesday. Netflix shares fell 8 percent Thursday midday.

Investors are more pessimistic on the economy and the state of the consumer given the pre-announcements and guide downs.

Here is what they said...

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