Why is this happening? You can massage the bottom line a little easier ... you can pull out special charges, you can increase cost savings, but the lack of revenue growth is hard to hide.
You can see this with International Business Machines: Earnings were up 13 percent year-over-year, but sales were up barely 1 percent, using constant currency.
This quarter’s other major earnings trend: Stocks that miss or disappoint on guidance, but trade up.
Take Qualcomm; it missed by a penny, and earnings per share and revenue guidance for the current quarter were both below estimates. The result: Stock trades up nearly 6 percent pre-open. Huh? True, it talked up the December quarter, but that's a long way away.
Qualcomm is not the only one. We saw it yesterday with Stanley Black & Decker ... earnings were well below expectations and guidance was lower, but the stock traded up.
Same with Ericsson and EMC.
Why is this happening? Because expectations are very low, and if you come in and disappoint you can still trade up, as long as the disappointment isn't a "worst case scenario."
1) The China slowdown shows up in U.S. stocks. One stock that missed and is NOT trading up: Yum Brands. Half of its profits come from China, so the stock is often looked at as a back-door play on that country. But live by the sword, die by the sword: As the China slowing story has gained traction in the past months, Yum has dropped along with the Shanghai Index. It's not that sales aren't growing: Same-store sales in China were up 10 percent, but that's half what it was a year ago. Inflation has eaten into profits.
2) Union Pacific shares trade flat after the railroad company posted better-than-expected quarterly profits. Revenue rose in all of the company’s business except coal, which was hurt by the mild winter weather and low natural gas prices. “Looking ahead to the second half of the year, the global economic outlook has become more uncertain and coal volumes remain a challenge,” said CEO Jack Koraleski.
3) Sherwin-Williams drops 3.1 percent after beating earnings expectations, helped by higher prices and ongoing momentum at its paint stores. Sherwin Williams reported second-quarter earnings per share of $2.17, compared to analysts’ $2.13 estimate. The company sees third-quarter and 2012 earnings per share bracketing the Street’s expectation.
—By CNBC’s Bob Pisani
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