Strategist Sees 'Real' Topline Growth in Q1 2010
The quarter ends on Wednesday and so far, 197 companies have posted positive outlooks while 282 companies posted negative. Will earnings be the market’s next challenge or are expectations so low that it will end up being a blow-out quarter? Craig Peckham, equity trading strategist at Jefferies & Co., and Ashwani Kaul, global head of research at Thomson Reuters, shared their insights.
“Expectations have been ratcheted up but companies are going to outperform analysts’ expectations,” Kaul told CNBC. “It will be the second quarter where they’ve done it.”
Kaul said topline growth in companies is still missing and projects an 11 percent decline in revenues. But that should change in 2010, he predicts.
“The first quarter of next year, we’re finally going to start seeing real topline growth,” he said. “We’re looking at 7.5 percent topline growth for the first quarter of 2010.”
Kaul said sectors that will do well include consumer discretionary and financials, while sectors that will disappoint include energy, materials and industrials.
In the meantime, Peckham said the second quarter was driven entirely by cost production that was greater than most analysts had expected.
“You didn’t see the kind of topline positive variance that the market is hoping to see more of in the third quarter,” he said. “It boils down to a question of earnings quality, and that quality really dictated by what you see happen in the revenue streams in the third quarter.”
Peckham said he expects the tech and consumer discretionary sectors will do well and warned investors against oil services and utilities companies.
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Disclosure:
No immediate information was available for Kaul or Peckham.
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