By Wallace Witkowski, MarketWatch
falling oil prices, strong dollar continues through first
quarter
SAN FRANCISCO (MarketWatch) -- Energy companies and those
relying heavily on international sales are expected to be the
biggest drag on earnings this coming season as the S&P 500
Index is forecast to see its year-over-year quarterly earnings
decline for the first time in nearly six years.
Stocks gained some needed support this past week
(http://www.marketwatch.com/story/us-stocks-futures-hint-at-strong-weekly-jump-2015-03-20)
after the Federal Reserve indicated a slower pace of gradual rate
hikes with the Dow Jones Industrial Average (DJI) advancing 2.1%,
the S&P 500 (SPX) rising 2.7%, and the Nasdaq Composite Index
(RIXF) gaining 3.2%. The weekly gains on the Dow and the S&P
500 put them back in the black for the year.
Investors had a taste of the international revenue drag this
past week as both Nike Inc
(http://www.marketwatch.com/story/nikes-third-quarter-profit-beats-but-sales-miss-on-a-stronger-dollar-2015-03-19).(NKE)
and Oracle Corp
(http://www.marketwatch.com/story/oracle-arnings-fall-hurt-by-rising-dollar-2015-03-17).(ORCL)
reported that quarterly sales would have been much better had it
not been for the stronger dollar.
With a little over a week left in the calendar quarter, the U.S.
Dollar Index (DXY), which gauges the dollar against a basket of
major currencies, has gained 8% on the year, while crude oil prices
have fallen another 15%. Those two factors are going to put a big
squeeze on energy companies and U.S. companies that rely on
international sales.
Already, S&P 500 earnings for the quarter are expected to
decline 4.8% from a year ago, which would be the first
year-over-year earnings decline since the third quarter of 2009. If
the average low-balling of two to three percentage points holds,
that still results in a decline.
Among companies with fewer than 50% of sales in the U.S., that
earnings decline more than doubles to 11.6%, according to John
Butter, senior earnings analyst at FactSet. Companies with more
than 50% of their sales in the U.S. merely break even compared with
the year ago quarter.
What's telling is when energy companies are taken out of the
mix, a great weight is lifted off the earnings for the rest of the
S&P 500, but companies drawing less than 50% of their revenue
from U.S. sales are still looking at a year-over-year decline in
earnings.
Excluding energy companies, the rest of the S&P 500 is
expected to see an earnings gain of 3.1%, according to FactSet
data. Companies with more than 50% of their sales in the U.S. are
estimated to see a 5.9% rise in earnings, while those with less
than 50% of sales in the U.S. are expected to see earnings decline
by 1.3%.
Notable earnings this week
Report Date Company/Ticker (FactSet EPS / revenue forecast)
Mon., March 23 None of note.
Tues., March 24 McCormick & Co. US:MCK (64 cents / $985.1 million)
Weds., March 25 Red Hat Inc. US:RHT (41 cents / $456.9 million)Paychex Inc. US:PAYX (46 cents / $701.3 million)
Thurs., March 26 Accenture PLC US:ACN ($1.07 / $7.38 billion)ConAgra Foods Inc. US:CAG (52 cents / $3.87 billion)PVH Corp. US:PVH ($1.73 / $2.1 billion)GameStop Corp. US:GME ($2.16 / $3.64 billion)
Fri., March 27 Carnival Corp. US:CCL (10 cents / $3.57 billion)
Subscribe to WSJ: http://online.wsj.com?mod=djnwires