After many stocks rallied during the best quarterly earnings season in nine years, investors began looking at the current quarter and the year ahead – and the 2019 outlook is not looking great.
Wall Street analysts are slashing earnings expectations for the first quarter of 2019 so sharply that the overall estimate of profit growth for the period just turned negative. Earnings are now expected to fall on average by 0.8 percent according to FactSet. That’s quite a reversal from September, when analysts expected profits to jump nearly 7 percent. Blame poor company outlooks accompanying the strong fourth-quarter numbers.
The slide in expectations matches with the view of Morgan Stanley chief equity strategist Mike Wilson, who has been warning of an earnings recession.
“Earnings are deteriorating even faster than we expected,” Wilson said in a note on Monday. “The earnings revision breadth over the past month has been even more negative than we expected leading us to think are earnings recession trough in the U.S. could be later than 1Q and deeper.”