Here Comes the Earnings Parade

Bob Pisani is off, this post was written by CNBC producer Robert Hum

Ahead of Alcoa’s earnings report after the bell, here are a few key issues at hand for the forthcoming corporate earnings season:

1) Will there be a more optimistic tone from CEOs on the near-term business conditions or will they remain very cautious about any broader economic recovery being still far off? Over the past few months, numerous corporate executives have hinted that they’ve seen declines slowing with the economy beginning to stabilize. At the same time, however, they have cautioned any strong bounce in demand won’t occur until next year at the earliest.

2) How conservative will companies be in giving earnings guidance for the second half of the year and has near-term visibility improved? During the past couple of quarters, companies have been extremely conservative, preferring to give low-ball forecasts or even suspending guidance in general due to tack of visibility in business conditions. If companies haven’t seen any improved visibility yet, look for this trend to continue.

3) Can earnings be fueled by top line growth or will cost controls continue to dominate the earnings picture? As business demand soured over the last several months, companies implemented effective cost controls to help sustain their earnings. If conditions are indeed stabilizing, however, it’s now important that companies begin to see their revenues pickup, rather than just relying on continued cost cuts to prop-up their bottom line.

Nevertheless, Q2 will be the 8th consecutive quarter of negative year-over-year earnings growth amongst S&P 500 companies, the longest streak since Thomson began keeping records in 1998.



Questions? Comments?