By: David Sterman of Street Authority
Over the past few years, a predictable trend has dominated earnings season. Analysts lower their profit forecasts in the weeks and months ahead of quarterly results, and then companies manage to slightly exceed the lowered set of expectations. It's happening again.
According to FactSet Research, on an aggregate basis, analysts lowered Q3 profit forecast by 4.2%, slightly above the typical 2.7% downward revision of the prior 20 quarters. In theory, lowering the bar further should boost the chances that companies manage to exceed current consensus forecasts.
But the typical "cut and beat" game may not be the key theme this time around. As third quarter earnings season gets underway later this week (as Alcoa (NYSE: AA) weighs in on Wednesday, October 8), a range of cross-currents promise to make this one of the more unpredictable earnings seasons in quite some time. Both positive and negative factors are likely to keep analysts and investors on their toes. This is not time to take a casual approach to earnings season. After rising 6% in the first six months of 2013, the SP 500 rose less than 1% in the third quarter.
Here are four key themes you need to monitor to help get a sense if the SP 500 can resume its upward trajectory in the fourth quarter: Continue reading "4 Variables That Could Affect Your Portfolio This Earnings Season"