This column originally appeared on Real Money Pro at 9:53 a.m. EST on Nov. 19.NEW YORK ( Real Money) -- Last Monday, in a long series on cliffs, I addressed the economic, tax, fiscal, political and geopolitical cliffs. I explained why I felt the fears associated with those cliffs were overblown and that the market could rally over the balance of the year. I did, however, stipulate that I was still fearful of the earnings cliff, which will likely constrain the market's upside (albeit, possibly to higher levels for the S&P 500). And there is nothing that I saw in the third-quarter reports that reduces my concerns:
- 95% of the companies in the S&P 500 have reported third-quarter results.
- Third-quarter 2012 EPS rose by 0.5% (above the consensus, which was down by 2%), but company share buybacks added about 1% to reported EPS. So, EPS before buybacks were actually -0.5%.
- Excluding financials, S&P earnings per share were -1.6%.
- 65% of S&P companies exceeded consensus forecasts, down from 69% a year ago. (The long-term average of beats is 60%, and the average beat since the Great Recession has been 74% over the past three to four years.)
- In third quarter 2012, 25% of the S&P reported worse-than-expected EPS vs. 22% a year ago. (The long-term average is 19%.)
- Third-quarter 2012 sales growth was a paltry +1.2%, as only 27% of the companies beat consensus while an outsized 54% missed expectations.
- Profit margins slipped modestly in the third quarter.