In A Stormy Earnings Season, These Two Sectors Should Be Safe Havens

By: Joseph Hogue of Street Authority 

In June, as the third quarter got underway, consensus profits for companies in the SP 500 were expected to show a modest 1% year-over-year dip. Three months later, analysts now think profits will slide nearly 5%, from year-earlier levels.

Of the companies that have announced guidance, 76 expect negative EPS growth for the third quarter according to FactSet Research. That compares to only 32 companies that have issued positive guidance for the three-month period so far.

The pain continues to build in the energy and materials sectors, but many other sectors are seeing downward earnings revisions as well. Fear of higher interest rates and declining earnings growth led an 8.6% drop in the SP 500 index, and a sharp spike in the VIX volatility index since mid-August.

The trend is so bad that analysts are expecting earnings growth of just 0.6% in the fourth quarter. The revenue picture is equally challenging.

Analysts think that third-quarter sales fell 3.3% against the same quarter last year. On a full-year basis, they are modeling for a 2.4% drop in sales. Unless revenue growth returns soon, investors may start questioning whether corporate management teams can squeeze further earnings growth from continued cutbacks. Continue reading "In A Stormy Earnings Season, These Two Sectors Should Be Safe Havens"

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