As we've noted--earnings season officially kicks-off later today, with Alcoa reporting after the bell. So will 4th quarter corporate profits be a boom or a bust, and what role will oil play? (an earlier post had some sector predictions). CNBC’s Mark Haines asked two analysts on today’s “Morning Call” to give their take.
Nick Raich, Director of Research at National City Private Client Group says, “We think 4Q will still be very good – double digits, but the trend where companies meet or exceed estimates will be a little lower. We expect 75-80% of companies (to meet or beat the street)… and we see 13% earnings growth.”
Raich feels that way because some companies have already reported 4Q earnings and on average they’re up 32% already. “So the first 5% of the S&P 500 are already on the clock for 4Q – (and with) 32% earnings growth.”
Steven Lord, Founder of the Trend Investment Group believes we’ll be hard pressed to make double digit earnings growth. “I’m looking at all the retailers having a difficult Holiday season and the electronic retailers having to discount to move product which will impact earnings," said Lord.
"And lower oil prices means the "integrateds" will be receiving a lower price for their products as well. So, I think the downside for earnings is there and I think more companies are going to miss in this quarter than we’ve seen in a while.”
Haines asked how the dip in oil might impact earnings.
Nick Raich thinks energy prices are going to continue to be volatile. "But in the long run we think by the end of ‘07 and into ’08…there will be a long term cycle back up in energy prices. We’ll reach new highs.”
“I think oil is going to help basic material and the industrial sectors,” added Steven Lord. “They’re buying a commodity they need at a lower price. The market is extrapolating the weather for a longer period than they should, but it’s probably a benefit.”
Remember--you can follow all of earnings season right here on CNBC.com.