Ask 10 people in New York who won the Greek election, and chances are 8 will respond correctly. Yet among all the manic-depressive euphoria surrounding Europe, most will likely have missed the following. Not that there's nothing wrong with that: as Goldman's David Kostin explains, even Goldman clients were caught unaware.
While investors focus on the European sovereign debt and bank problems and Fed policy, our client discussions reveal that portfolio managers are not aware of the wave of negative preannouncements across the market. The reduction between the midpoint of new guidance and consensus estimates prior to the pre-announcement ranged from 2% to 20%. The median 2Q reduction equaled 4%. Firms lowering quarterly earnings guidance include: Pall (PLL), Nucor (NUE), Ryder Systems (R), Proctor & Gamble (PG), Cardinal Health (CAH), Texas Instruments (TXN), Starbucks (SBUX), Autodesk (ADSK), FedEx (FDX), Jabil Circuit (JBL), Bed, Bath & Beyond (BBBY), and Adobe Systems (ADBE).
Explanations for the lower guidance ranged widely. Europe ranked at the top of the list but weak US demand was also identified as a cause of lower revenue guidance. Many firms expect slower demand to continue through 2012. For Bed, Bath & Beyond promotional pressures are squeezing margins. Texas Instruments’ customers are still hesitant to rebuild inventory and industrial orders are moderating due to uncertainty. Proctor & Gamble cited operational errors when lowering its sales and EPS guidance and cut its spending on developing market expansion. FedEx noted margin headwinds from higher pension expenses.
Don't worry though: CTRL-P can fix aaaaaaall of the above. Just sprinkle some magic toner dust.
And if that fails, who needs earnings anyway?