This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Market Preview: Low Bar vs. Higher Multiple

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.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
SPY $209.73 -0.37%
AAPL $118.44 -2.36%
FB $94.14 0.14%
GOOG $631.21 0.90%
TSLA $259.99 -2.31%

Markets

Chart of I:DJI
DOW 17,598.20 -91.66 -0.52%
S&P 500 2,098.04 -5.80 -0.28%
NASDAQ 5,115.3820 -12.8990 -0.25%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs