Earnings Season Doesn't Start Well

From the AP

Alcoa, the world's third-largest aluminum producer, said Monday it earned $303 million, or 37 cents per share, for the first three months of the year, compared with $662 million, or 75 cents per share, during the same period last year.

Sales fell nearly 7 percent to $7.38 billion, from $7.91 billion a year earlier.

Excluding the impact of restructuring and taxes, operating income was 44 cents per share, down from 79 cents per share a year ago. The weaker dollar reduced profits by $68 million, or 8 cents per share, on a quarter-by-quarter basis.

The results failed to meet some Wall Street expectations. Analysts surveyed by Thomson Financial, on average, forecast earnings of 48 cents per share on revenue of $7.18 billion.

Alcoa shares fell 26 cents to close at $37.18 Tuesday.

According to Yahoo Finance Alcoa is the largest company in the aluminum sector by far; it's market cap is $28.6 billion with he next largest company at $5.4 billion.

From Barron's citing a CSFB report (Wednesday April 9):

UPS ANNOUNCED THAT IT HAS reduced its first-quarter earnings-per-share guidance from 94 cents-98 cents to 86 cents-87 cents (compared with our estimate of 92 cents and consensus of 93 cents).

The company cited higher-than-expected fuel costs and soft demand at its U.S. package division as the primary reasons for the earnings shortfall (which management indicated could happen at their March investor day). The company noted that the economy worsened during the quarter which led to a "significant reduction" in package volumes and a trade down from premium price (Next Day) to lower-yielding products (Deferred).

In light of the announcement, we have lowered our first-quarter and fiscal 2008 EPS estimates from 92 cents and $4.40, respectively, to 86 cents and $4.00. We have also reduced our fiscal 2009 EPS forecast by 30 cents to $4.65 as the economic outlook remains highly uncertain.

According to Yahoo Finance, UPS is the largest air deliver and freight company, with a market cap of $73.3 billion. The next largest company is FedEx with a market cap of $28.8 billion.

From Marketwatch:

General Electric Co. shook the U.S. stock market Friday, reporting a 6% drop in first-quarter net profit -- largely over trouble in its financial-services businesses -- and cutting its 2008 earnings outlook.

It was GE's first major downward earnings revision in memory, Oppenheimer analyst Christopher Glynn said in a note, and reflected mounting difficulties posed by a weakened U.S. economy.

For the first quarter, General Electric said net income dropped to $4.3 billion, or 43 cents a share, from profit generated during the first quarter of 2007, while revenue rose 8% to $42.24 billion.

GE is one of the largest companies in the world and is a member of the DJIA.

So -- what's the point of all these stories?

All of these stocks are bell weather companies -- they are the largest company in their sector by far. As such, they are more likely to be doing well in a downturn -- or at least not as badly as you would think. However, they are not doing well which means other, smaller, less established companies stand a smaller chance of doing well.

Also -- expect there to be more spin associated with these numbers. For example -- expect to hear "outside of financial stocks, everything is fine." Unfortunately there is going to be more and more of that now.