Tags: earnings | Economic Outlook | U.S. economy

More than half of S&P 500 corporations have reported fourth-quarter earnings, and so far the growth rate is coming in at an average 7.53%.

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The previous eight consecutive quarters saw double-digit increases, so it appears that long winning streak came to an end with the end of 2011.

Most analysts previously had forecast double-digit earnings growth to continue through 2012 and into 2013, but many now believe the streak is over.

“Analysts do not anticipate a return to double-digit corporate earnings growth until fourth-quarter 2012 earnings are reported a year from now,” according to Standard & Poor’s.

In their latest Lookout Report, S&P researchers and analysts say they find it interesting that consensus earnings expectations are slipping even though the risk of recession has subsided.

“This might suggest that analysts have a general lack of faith that economic conditions will improve significantly and reduce uncertainty this year,” S&P writes.

S&P analysts have compiled a list of reasons most commonly cited by CEOs when relaying disappointing fourth-quarter 2011 earnings: global macroeconomic concerns, changing consumer behavior due to the economic environment, weakness in Europe, slowing growth in the emerging economies (although there is belief that emerging market growth will continue long-term), and declining commodity prices.

The Lookout Report suggests that CEOs and many market analysts are underestimating the potential for growth in the U.S. economy and the global economy in 2012, based on various data released in recent weeks.

“We reiterate our belief that the rate of job creation in the world's largest economy (the U.S.) will be a major factor to follow in 2012, relative to corporate profit growth and investor preference for risk aversion,” S&P writes.

Comments (1)

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Earnings growth is the combination of nominal sales growth, change in shares outstanding and change in profit margin. We expect nominal sales growth to be between 4% and 7% this year, shares outstanding will likely shrink by maybe 1%, and profit margins are likely to stay where they are or shrink since they are near all time highs. Total it all up and you get earnings per share growth of somewhere between 3% and 9%- barring a recession.

bramsay , February 11, 2012

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