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Guest Post: Q1 2011 Earnings Preview

Tyler Durden's picture





 

Submitted by MacroStory.com

Q1 2011 Earnings Preview

“Illusions commend themselves to us because they save us pain and
allow us to enjoy pleasure instead.  We must therefore accept it without
complaint when they sometimes collide with a bit of reality against
which they are dashed to pieces” – Sigmund Freud

An interesting thing happened last week, garnering no coverage in the
face of a global meltdown, literally and figuratively.  Nike reported
horrible earnings.  A rare miss by the industry all star is best summed
up by CEO, Mark Parker  ”higher costs for materials, labor and freight
are here, as predicted.”  Then there was Fedex with another miss
“earnings could be trimmed by ongoing Middle East turmoil and fuel
costs.”

Cisco warned about earnings the prior two quarters yet the Bernanke
fueled optimism simply chalked it up to company specific issues and
having nothing to do with shrinking government spending. Cisco, Nike and
Fedex are not alone.  Talbot’s warned (and also confirmed when February
CPI showed contraction in “apparel”). Kroger one of the largest grocery
stores reduced 2011 guidance. Darden Restaurants lowered 2011 guidance.
 Best Buy lowered 2011 guidance.

Friday saw the jubilation of bank dividends being “returned” yet C
and BAC did not even ask for Fed approval which means their earnings
outside of FASB shenanigans will continue deteriorating.  These are not
isolated warnings but rather across all industries.  Month after month
PPI and CPI have been showing rising inputs costs, margin compression,
rising non discretionary prices and contracting discretionary prices. At
what point will corporate profits peak?  It is quite possible that time
is upon us.

Perhaps the bulls will spin Apple’s higher freight costs caused by
global supply disruptions as bullish for Fedex.  Rising food prices are
bullish for Caterpillar as farmers will buy new tractors. The chatter
from the “all in” fund managers is how cheap stocks are. PE ratios are
cheap on a historical basis spews from their lips like “crisp 20′s” off
the Bernanke press.  Let’s look at the facts and see just how cheap
stocks are on a historic level.

PE Ratios are not low, dividend yields
are horrible and earnings yields are average (all based on data from
1960 to present). So far a war in the Middle East, a nuclear meltdown of
Japan and rising commodity prices have only been able to knock the SPX
down 5%.  Alcoa (AA) will kick off the Q1, 2011 earnings season on April
11. As Freud said, at some point reality will dash illusions to pieces.
Perhaps that day is sooner than most anticipate.

 


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Sun, 03/20/2011 - 09:37 | Link to Comment Cindy_Dies_In_T...
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Hi Everyone--

 

Last week was a record breaking week for the team at ZH as they kept posting article after article to keep us current. Have you considered that the ZH team needs to eat?

 

I'll spare the Sally Struthers routine, but PLEASE donate to ZH. Whether its just enough to buy the Tylers a beer, or something larger, please do your part.

 

Parting with $20 won't kill you and you will certainly be rewarded for your efforts by getting all the news that the MSM doesnt have the balls to print.

 

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Sun, 03/20/2011 - 10:08 | Link to Comment velobabe
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visible donations, are accepted.

Sun, 03/20/2011 - 10:11 | Link to Comment snowball777
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Your order is complete! Your order number is 1508.

Done! Please keep up the great work Tyler, Marla, et al.

Have you considered that the ZH team needs to eat?

Look, we tried to tell them that gold was not a source of nutrition, okay?

Sun, 03/20/2011 - 10:29 | Link to Comment holdbuysell
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Done, and a big thanks to the Tylers.

Sun, 03/20/2011 - 15:17 | Link to Comment wandstrasse
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done. 20$ were 14.85€. Today/here in D this would buy 1 pizza/pasta + drink or 1/2oz silver coin incl. VAT. May one of the Tylers  enjoy either one.

Sun, 03/20/2011 - 16:01 | Link to Comment ILoveTheWorld
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You should post this in every every article for a couple of days, so everyone gets reminded. I never even saw the "donate" button before you told us.

Sun, 03/20/2011 - 18:38 | Link to Comment IrrationalMan
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also click the ads on the sides of the articles.

Sun, 03/20/2011 - 09:39 | Link to Comment blunderdog
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I kept wondering if a horrible economy was ever going to start having economic effects on business.

Sun, 03/20/2011 - 09:43 | Link to Comment Smiley
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Food and energy aren't factored into the CPI, all is well; move along.

Sun, 03/20/2011 - 13:45 | Link to Comment monopoly
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Smiley, lolol perfect, just perfect.

Sun, 03/20/2011 - 09:51 | Link to Comment css1971
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Meh. Who gives a toss? The stock will rise anyway.

Sun, 03/20/2011 - 10:05 | Link to Comment snowball777
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The tip top...tippity top...tip tippity top and you don't stop.

Sun, 03/20/2011 - 10:25 | Link to Comment insidious
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You guys are excellent. I am donating ASAP. Thanks!

Sun, 03/20/2011 - 10:37 | Link to Comment insidious
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Donation submitted. How about an email every 6 months or so reminding us to consider contributing to ZeroHedge?

Sun, 03/20/2011 - 11:40 | Link to Comment TexDenim
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Higher energy prices, just-in-time supply disruptions, the end of Bernanke's money circus -- it doesn't look good for great earnings.

Sun, 03/20/2011 - 12:01 | Link to Comment ihot
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Great job Zerohedge. You're my favorite website.  Here's proof of donation from my PayPal record:

Mar 20, 2011    Payment To Zero Hedge, LLC  Completed Details
 Payment To Zero Hedge, LLC 6U063985J22530531   -$nn.00 USD

Sun, 03/20/2011 - 12:36 | Link to Comment Guerette
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Just donated. 

Sun, 03/20/2011 - 13:16 | Link to Comment jkruffin
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If I remember correctly, NIKE set off the findings of the last collapse in 2008.

Deja Vu again it seems.

Sun, 03/20/2011 - 13:40 | Link to Comment MacroStory
MacroStory's picture

I hope you are right because I really am tired of this circus called a market.  

Sun, 03/20/2011 - 14:27 | Link to Comment jkruffin
jkruffin's picture

Indeed, just found it:

The provider of sporting apparel realised a 46% drop in earnings to $243.8 million or 50 cents from $463.8 million or 92 cents a share in 2008 as revenues dropped 2% to $4.4 billion and a $241 million after-tax, non-cash charge.

This was the beginning of the collapse..............reported much later................

Sun, 03/20/2011 - 13:28 | Link to Comment asteroids
asteroids's picture

In looking at those graphs the future is obvious. Reversion to the mean is a bitch!

Sun, 03/20/2011 - 13:42 | Link to Comment monopoly
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Excellent posting all. Yes, yesterday was my latest donation of $100.00. I don't care if you can only donate $1.00. It all counts. This site is not always right, but it is Always Truthful. Zero Hedge is here to make us think and Make our Own Decisions with information that is not disseminated in the MSM.

Have you also noticed, as far as I can tell, not once, not once has Tyler or staff asked US for money. For me, the past two years, the returns on my investment here cannot be calculated.

Agree or disagree, that is just fine. But donate to keep the blood flowing here at...Zero Hedge. I only know of 5 or 6 sites that keep us truthfully informed. Now more than ever, as things continue to deteriorate on our planet, the spin will get ever louder from our govt. MSM and those honest Wall Street professionals.

This site is Not an option for me.

Sun, 03/20/2011 - 14:52 | Link to Comment buzzsaw99
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The P/E denominator is subject to radioactive decay. Half-life two years tops.

Sun, 03/20/2011 - 16:28 | Link to Comment Brokenarrow
Brokenarrow's picture

This story makes real sense--provided the Fed wasn't in the market everyday juicing the ES.

Sun, 03/20/2011 - 17:04 | Link to Comment Voxifera
Voxifera's picture

The fed can always buy a warehouse and start buying iPads, Nike Shoes and requesting shipping from fedex. When it comes to unload them, the physical item will still be worth something.

 

 

Sun, 03/20/2011 - 17:52 | Link to Comment Dirt Rat
Dirt Rat's picture

Anything is worth more than the all the crummy mortgages and other MBS crap they've already purchased.

Sun, 03/20/2011 - 17:48 | Link to Comment MiningJunkie
MiningJunkie's picture

Markets will NOT crash until the banksters are in jail; why they are NOT in jail is that the market has not yet crashed. Their only protection against a massive roundup of criminal elites is a "juiced E/S"...

Zimbabwe is the new normal.

Sun, 03/20/2011 - 18:26 | Link to Comment robertocarlos
robertocarlos's picture

I'm broke. I'm not going to the bank for a loan to buy some GD Nikes.

Sun, 03/20/2011 - 18:43 | Link to Comment FoieGras
FoieGras's picture

Pretty amateurish analysis looking at nominal dividend yields instead of e.g. the Dividend Yield vs Corporate BBB Bond spread.

E.g. if dividend yields are 6% does that make equities attractive, if investment grade corporate bonds pay 16% at the same time?

Nominal dividend yields are worthless by themselves as an indicator.

 

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