Early reports for the finance sector’s third-quarter 2012 performance indicate that it is on track to best all other sectors, at overall profits of 11.8%, in what looks to be an otherwise lackluster earnings season.
Both S&P Capital IQ and Thomson Reuters expect that the companies of the S&P 500 index in Q3 will post their first year-over-year earnings decline in almost three years. But while earnings expectations are at a three-year low, the stock market index is at a four-year high, said S&P Capital IQ Global Markets Intelligence senior manager Christine Short during an earnings outlook webinar on Monday.
Short also took note of the finance sector’s relative strength, saying that stock analysts expect it to post the highest quarterly earnings out of the 10 industrial sectors.
“Only the financial sector is expected to post double-digit growth, of 11.8%, in the third quarter,” Short said.
S&P Capital IQ’s research shows that Wall Street analysts are projecting a 1% earnings decline compared to a year ago, with estimates the lowest they’ve been since the Great Recession of 2009. Revenue growth expectations stand at only 1%, their lowest since Q4 2009, and well below the 10-year average of 7%.
“The only way for companies to succeed is growing that top line,” Short said, noting that such low growth suggests the U.S. economy may be headed for another recession. “One percent revenue growth is just not sustainable.”