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Why Q4 earnings season made a poor start

Traders work on the floor of the New York Stock Exchange.
Brendan McDermid | Reuters
Traders work on the floor of the New York Stock Exchange.

I have often used the phrase "earnings recession" to describe the three consecutive quarters of negative earnings growth we have seen:

S&P 500 Earnings:
Q2 2015: -0.7%
Q3 2015: -1.5%
Q4 2015 (est.) -5.5%
Source: Factset

But after looking at very early numbers for earnings in the fourth quarter, I've decided I am more concerned about a "revenue recession."

Revenues:
Q1 2015: -2.9%
Q2 2015: -3.3%
Q3 2015: -3.9%
Q4 2015 -3.3%
Source: Factset

Why am I more concerned about revenues? Because the trend is implying that global business activity is deteriorating.

With earnings, we can get all sorts of financial engineering, like cost cutting, or buybacks.

But consistent lack of topline growth — which we are seeing — really calls into question the sustainability of earnings growth.

Here's what worries me: so far, 23 S&P 500 companies have reported earnings for the fourth quarter. Of the 23, about 75 percent have beat on the bottom line.

That's not what worries me. What worries me is that 19 of the 23 have missed on revenue growth, according to Earnings Scout.

Strange, no? Three-quarters beat on bottom line, but the same portion misses on topline.

That's disappointing. And we are not talking about a lot of industrials and energy names that have reported. We are talking consumer names. Nike. Bed Bath and Beyond. Walgreen. Autozone. Costco. Federal Express. General Mills.

These companies have two problems: they are multinational — they get much of their revenues overseas, so the global slowdown is really affecting them. And second, the strong dollar is really hurting them. I will be doing a lot of reports around the impact of that dollar on these company's earnings.

  • Bob Pisani

    A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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