"Earnings Roundup: Company-Issued Guidance at Its Most Negative Level on Record"

From Reuters' Alpha Now:

The current N/P earnings guidance ratio of 11.4 for Q4 2013 is the most negative on record. Prior to this, 6.8 was the highest negative-to-positive ratio. Some broad reasons companies are giving for negative guidance are that consumers remain cautious about spending, and that October’s federal government shutdown reduced government spending.

Now that the majority of S&P 500 companies have reported their third-quarter earnings results, investors are looking ahead to the fourth-quarter earnings season. Currently, analysts expect earnings to grow 7.8% over the fourth quarter of 2013. This estimate is down from the 10.9% estimate at the beginning of the quarter. Given the 0.4% expected revenue growth, it may be difficult to achieve profit increases of the magnitude currently expected.

Companies have been expressing concerns about high fourth-quarter expectations in the form of earnings guidance. So far, S&P 500 companies have issued negative guidance 103 times and positive guidance only 9 times. The resulting 11.4 negative-to-positive guidance ratio is the most negative on record by a wide margin. The highest N/P ratio prior to this quarter was 6.8 for Q1 2001.

Throughout the first three quarters of this year, company-issued guidance was more pessimistic than usual, resulting in downward estimate revisions on the part of analysts. Though estimates were frequently being cut in prior quarters, analysts and company management teams frequently left their full-year estimates intact under the assumption that profits would be made up in the latter part of the year. Now that the fourth quarter is upon us, earnings expectations are still very optimistic, resulting in negative guidance as companies adjust their internal projections based on the current environment....MORE