Guest Post: Q1 2011 Earnings Preview

Tyler Durden's picture

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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

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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Cindy_Dies_In_The_End's picture

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visible donations, are accepted.

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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?

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Done, and a big thanks to the Tylers.

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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.

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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.

IrrationalMan's picture

also click the ads on the sides of the articles.

blunderdog's picture

I kept wondering if a horrible economy was ever going to start having economic effects on business.

Smiley's picture

Food and energy aren't factored into the CPI, all is well; move along.

monopoly's picture

Smiley, lolol perfect, just perfect.

css1971's picture

Meh. Who gives a toss? The stock will rise anyway.

snowball777's picture

The tip top...tippity top...tip tippity top and you don't stop.

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insidious's picture

Donation submitted. How about an email every 6 months or so reminding us to consider contributing to ZeroHedge?

TexDenim's picture

Higher energy prices, just-in-time supply disruptions, the end of Bernanke's money circus -- it doesn't look good for great earnings.

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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
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jkruffin's picture

If I remember correctly, NIKE set off the findings of the last collapse in 2008.

Deja Vu again it seems.

MacroStory's picture

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

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................

asteroids's picture

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

monopoly's picture

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buzzsaw99's picture

The P/E denominator is subject to radioactive decay. Half-life two years tops.

Brokenarrow's picture

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

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.



Dirt Rat's picture

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

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.

robertocarlos's picture

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

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.