Updated from 5:43 p.m. ET to add commentary on April historically being the best month of the year.
NEW YORK (TheStreet) -- If you thought meager earnings growth in the first quarter was going to derail this rally, think again.
The low bar theory is already making the rounds as Citigroup pointed out Monday that 2% year-over-year growth for the S&P 500 is "not hard to beat," and said it expects corporate earnings to top the current consensus view by 3.5%. The firm is less optimistic about later in the year though, saying the expectation for 16% growth in the fourth quarter is "far more questionable."
In fact, Citigroup expects "no EPS growth acceleration in coming quarters," i.e. the rest of fiscal 2012, and said it believes estimates for the energy sector in the latter part of the year may be too high."[T]he 43% gain projected for the sector by 4Q 2012 appears to require at least a 10% rally in industrial commodities prices from current levels," the firm said, adding later: "The rise in the oil price -- in the absence of recession -- is likely the largest upside risk to our estimates overall given an S&P Energy sector weight that is triple energy's share of U.S. income." The estimates may vary -- Thomson Reuters data puts expected earnings growth for the S&P 500 at 3.2% in the first quarter, while the S&P Capital IQ sees the growth rate at just 0.9% -- but the message is the same: This reporting season will be a bit restrained. Whether the bulls can turn that into a positive remains to be seen. Companies have wrung all the profits they can out of the cost-cutting efforts prompted by the financial crisis, and now need to start growing the top line again. The economy is cooperating but not exactly going gangbusters with the unemployment rate still elevated and the housing market arguably at a bottom but not yet showing significant price appreciation. First-quarter results may get a pass, and guidance could steal the spotlight. After all, fourth-quarter earnings season wasn't that great, and stocks hummed right along with the S&P 500 delivering its best first quarter in more than a decade. Earnings grew 9.2% year-over-year in the quarter, according to Thomson Reuters, which said 62% of companies beat the consensus view, the lowest rate in three years.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV