Tallahassee Journal

Quarterly earnings bar lowered as oil slump eats into profit

Quarterly earnings bar lowered as oil slump eats into profit

The fourth-quarter earnings reporting season kicks off with expectations low after analysts slashed estimates sharply for the energy sector. Wall Street expects a more volatile earnings season amid the impact on earnings from plunging oil prices and a strong dollar. In early trading Monday the Dow Jones industrial average, which moved up or down at least 100 points every day last week for the first time since October, was down 115 points, or 0.6% to 17,622.AP FINANCIAL MARKETS WALL STREET F USA NY

Aluminum-maker Alcoa reports after the closing bell Monday, marking the unofficial start to the reporting season, which takes a look at corporate profitability in the three months ended December. Alcoa is expected to earn 27 cents a share, a 576% jump from the 4 cents a year ago. Later this week, major banks such as JPMorgan Chase, Wells Fargo and Bank of America report.

Analysts have been slashing profit estimates sharply in recent months, as the 50%-plus plunge in oil prices since the June highs has sparked a massive downgrade of the earnings outlook for companies in the energy sector. There is also concern that earnings of multinational U.S. companies will be hurt by the continued strength of the U.S. dollar versus foreign currencies, as a strong dollar means U.S. profits from abroad are reduced when they are translated back into dollars.

Analysts now forecast energy earnings to contract nearly 21% in the fourth quarter vs. a year ago, down sharply from the 6.6% profit growth expected back on Oct. 1. Nine of the 10 major sectors in the S&P 500 have seen their estimates slashed since Oct. 1. As a result, the broad Standard & Poor’s 500-stock index is now forecast to grow earnings at just a 4% clip, down from more than 11% three months ago. Wall Street is split as to whether the sinking growth rate will sink stocks or whether the bar is now set so low that companies will top expectations and give the stock market a lift. If he’s right, that would mean earnings for the broad market index would rise a respectable 6% to 8%.