Pessimism on Profits Climbs

Many more U.S. companies expect profits to trail estimates than to exceed them.

Earnings pessimism among U.S. chief executive officers is climbing to levels last seen when the Standard & Poor’s 500 Index was mired in bear markets.

Over the last four weeks, the ratio of companies saying profits will trail estimates compared with those saying they will exceed them climbed to 4.3, according to 69 earnings previews compiled by Bloomberg. The rate matches peaks reached in February 2009 and October 2001, the data show.

Intel Outlook

Intel, the world’s largest semiconductor maker, last month reduced its third-quarter sales forecast, citing declining demand for personal computers from corporate customers in a weakening economy. The Santa Clara, California-based company will probably say on Oct. 16 that sales during the July-to-September period fell 7 percent to $13.2 billion, according to the average analyst estimate in a Bloomberg survey.

‘Wrong Side’

“Nobody wants to be caught on the wrong side of saying the company is going to do great and then things fall apart,” Stone, chief investment strategist at PNC in Philadelphia, said in a phone interview yesterday. His firm manages about $112 billion. “The bar is set low enough that I don’t think it imperils the bull market in terms of the earnings picture. For the third quarter, there is a good chance that companies could come out and ahead.”

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