Second quarter earnings are set, at least for those firms on a calendar year. The period was fairly strong economically, except perhaps for June. That means that some earnings could come in weaker than expected. Companies and securities analysts may also begin slashing their third quarter forecasts. Many economists expect GDP growth in both the US and overseas to slow. Others believe many countries will go into double dip recessions which leave multinational companies particularly vulnerable.Several large companies, at the very least, are likely to miss the high end of the estimates for their earnings expectations including Ford Motor (NYSE: F), Google Inc. (NYSE: GOOG), Apple Inc. (NASDAQ: AAPL), and GE (NYSE: GE).
Consensus earnings estimates for the third quarter for Ford are for $.24 per share, but the low end of analysts’ forecasts is $.10, down from $.26 last year. Slowing car sales in the US and Europe could erode Ford’s margins.
The consensus EPS forecast for Google is $6.88, up from $5.89 in the third quarter of last year. The lowest estimate among analysts is $6.25. The loss of business in China, and a drop in search advertising could cause Google to miss Wall Street’s expectations.
Apple Inc. may be the least vulnerable of the large tech companies when it comes to earnings. New products including the iPhone 4 and iPad should keep its EPS unusually strong, but analysts tend to be very optimistic about Apple’s prospects and may have ratcheted up their forecasts too high. The consensus for Apple’s September quarter earnings is $3.73, up from $2.77 last year. The low estimate is $3.22. Apple will have to do much better than that to keep is remarkably lofty valuation.
GE (NYSE: GE) may be the most vulnerable of the large multinationals. Its financial units are particularly vulnerable to the economy as are its manufacturing and medical equipment businesses. Consensus forecasts are for EPS of $.27, up from $.22 last year. But the low end of estimates is $.25 and GE has a habit of disappointing when it puts out its numbers.
It will only take “misses” at a few large companies to scare the market enough to make it sell off sharply. And, with the economy reeling, those misses are becoming more likely.
Douglas A. McIntyre