Get Ready for a Bumpy Earnings Season

03/21/2012 3:41 pm EST

Focus: MARKETS

Jim Jubak

Founder and Editor, JubakPicks.com

Wall Street is projecting the first quarterly drop in overall earnings since 2009, so we’ll soon see how the market responds, writes MoneyShow’s Jim Jubak, also of Jubak’s Picks.

First-quarter earnings season doesn’t officially start until Alcoa (AA) reports on Tuesday, April 10, but I’m already seeing signs that Wall Street analysts are buckling their seatbelts in preparation for a bumpy ride.

The current read is that first-quarter 2012 earnings for the stocks in the S&P 500 will come in 0.5% below earnings for the first quarter of 2011. That would be the first year-to-year drop in quarterly earnings since the third quarter of 2009.

There’s no one big culprit to the drop, according to analysts, but rather lots of modest declines adding up to an overall drop. The strong dollar, as a result of the turmoil of the Greek debt crisis, will cut into profit margins. Slower growth in emerging economies such as China will reduce sales. Commodity prices have crept higher, again reducing margins.

Revenue for the S&P 500 stocks is expected to climb by 3.5% from the first quarter of 2011, but profit margins are projected to fall for the first time in two years.

One result of expectations for a blah earnings season is that some companies are jostling for position at the front of the earnings parade, so they can get their good news out while investors are still in a mood to notice.

JPMorgan Chase (JPM) is always near the first of the big banks to report, but this quarter Wells Fargo (WFC)—which usually reports well down the bank schedule—has moved its earnings report up. Now both banks will report earnings before the New York market opens on Friday, April 13. Think maybe Wells Fargo believes it has a good story to tell?

Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund, may or may not now own positions in any stock mentioned in this post. The fund did own shares of Polypore International as of the end of September. For a full list of the stocks in the fund as of the end of September see the fund’s portfolio here.

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