Earnings --- Su (Fast)
SBC --- Danielle (fast)
>> we are approaching the halfway point of earnings season with most companies so far posting profits meeting or beating analysts estimate. technology, though, has been the exception. bloomberg’s su keenan takes a closer look.
>> with the broader market closing lower for the sixth straight week due in part to investor concern over earnings, it’s possible to lose track of the big picture. in the words of the director of research at zaches.com, a data gathering firm, second quarter earnings have been fantastic.
>> it’s actually 70% of the s&p 500 companies that have reported so far have exceeded estimate. 20% have come in in line. 90% meeting or exceeded. what is disappointing is the technology are starting to warn about the upcoming quarters that maybe they’re not going to meet them.
>> and of course t latest example of such disappointment, microsoft’s outlook. as we have reported, the software company says a drop in investment income will hurt profit this is year. a.g. edwards chief strategist says that many investors expected the early cycle recoughry in tech to resemble the 1999 boom. he sees fund managers adjusting portfolios to reflect the best valuations.
>> and valuations are a little bit better in some of the more defensive sectors of the market . so the highest valuations tend to be in the more cyclical segments of the market and that is where you are seeing some deceleration and earnings growth. a little bit more inflation and slower earnings growth. we think the s&p will show us 13-15% earnings growth the last half of the year versus the 20% plus the first half.
>> on that slowdown in earnings, u.s. trust cheap informsment officer does not think earnings will slow to tex tent of the recovery.
>> we are advising clients right now to lean into the wall of worry you talked about because the underlying earnings picture going to shine through. granted, there is an awful lot of concern. investor sentiment right now is very negative. cash is built up in accounts generally. but we are emphasizing this and we think that the market , both s&p and dow, are likely to be up modestly by year end.
>> and we end on the bullish note. back to you.
>> bloomberg’s su keenan. well, going from the week that was to the weeks ahead for corporate earnings, u.s. phone companies are one of only two industry groups prepredicted to report earnings next year. after s.b.c. this week showed the first sales gain in 15 quarters. the shares have been the worst performers in the s&p 500 since the start of last year. investors say the group is finally poised for a rebound. for some detail, let’s welcome bloomberg stocks reporter danielle sessa. what is going on in the phone exeaps? is it simply a matter whoof goes down can’t go down forever? or is there solid business reasons?
>> everyone knows it earnings growth is expected to slow for whole market . the telephone stocks are one of the few groups moving in the right direction. this year they are expected to have a 15% decline in earnings and some investors think this is the bottom and can’t get any worse. next year they are expecting 1% growth. and they are moving in the right direction. analysts and investors think that phone stocks may start to participate in the rally and also, another thing that makes the stocks attractive and are getting investors enthused about them is the dividend yield. they have the second highest dividend yields as a group in the s&p 500 s&p. and in the market where maybe it’s going side waist or falling, a big amount of the return will come from dividends.
>> what about at&t and their decision to exit the residential long distance market , residential service. that’s got to help these guys.
>> as you noted before, the u.b.s. analyst upgrading shares of the other baby bells because of less competition in the industry. and also with s.b.c. reporting the first quarterly sales gain in 15 quarter, that is a sign that things are getting better. they are making some strides with getting customers to sign up for the d.s.l. internet service and also verizon announcing they will have internet phone service to help compete and keep customer.
>> reporting better results for verizon and bellsouth next week. what is expected from this?
>> bell south is supposed to have little change in frernings a year ago. verizon is supposed to have a 13% drop. and this is wake baked in. this is what we know and the thinking next year that thing wills start to improve.
>> any particular one of those baby bells, as they still call them, even though they’re big, that stands snout.
>> investors seem to favor verizon with a hire dividend yield and also because of the wireless business. that is a big component comprising 40% of the revenue while maybe growth won’t be so great on the wire line side. the wireless side is a momentum and is growing.
>> who is the laggard?
>> the laggard is at&t. it has the highest dividend yield in the group. analyst and investors are concerned about the prospects for the company, so we’ll see what happens.
>> ok. thank you very much. bloomberg’s daniel sessa. well, goldman sachs wants to know what job creation slowdown? the number of jobs created in the u.s. was a bit lower in june, but the economists at the goldman sachs firm are raising their forecast for job growth this month. we’ll take a look in the chart of the day.
