NEW YORK ( TheStreet) -- Is it too early to start worrying about third-quarter earnings just yet? Apparently not.
With the major U.S. equity averages hovering at multi-year highs and quantitative easing all the rage among the world's central banks, questions about valuations are starting to be asked. After all, profits -- not bond-buying programs -- are historically the bedrock method for placing a value on a public company, and the expectations for the third quarter are ugly.
According to Thomson Reuters, the consensus view is for a year-over-year decline of 2.2% in earnings for the S&P 500 in the third quarter. That's down from an expectation for growth of 3.1% as of July 1. What's more, the firm says company guidance is the worst it's been in more than 10 years with negative pre-announcements outpacing positive ones by a 4.2 -to-1 ratio.
Nearly half (49%) of the companies issuing warnings cited Europe as a factor for their lower view while other reasons included the impact of the strong U.S. dollar, commodity prices and seasonality.Citigroup observed Wednesday that there's no reason to expect all this liquidity being pumped into the markets by central bankers to flow to the company bottom lines anytime soon. "With the help of the ECB and the Fed, global equity markets are now close to, or through, their highs for the year, the firm wrote. "While central banks have supported risk appetites, we are not sure they will be able to support corporate profits." S&P Capital IQ was of a similar mind, asking how many bullish catalysts remain for stocks now that all the QE bazookas have been fired. With earnings growth stalling, the firm said the uptrend is relying on expansion of price-to-earnings multiples. "
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
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
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts