Analysis: Big-name profit warnings worsen earnings outlook

Thu Jun 21, 2012 2:34pm EDT
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By Ryan Vlastelica

NEW YORK (Reuters) - Weakening business activity worldwide is hitting U.S. companies where it hurts, with more of them signaling disappointing results than at any time over the past decade.

Many bellwether companies, including two Dow components, have come out in recent days with profit warnings, and the slowing in Europe has been cited as a major factor for those outlooks.

For every company that has raised its second-quarter profit outlook, 3.6 have warned, the worst ratio since the third quarter of 2001, according to Thomson Reuters data.

Firms including PepsiCo Inc (PEP.N: Quote), package shipper FedEx Corp (FDX.N: Quote) and tobacco company Philip Morris (PM.N: Quote) all lowered earnings expectations in recent days, citing concerns about Europe.

On Wednesday, Procter & Gamble Co (PG.N: Quote) cut its growth forecasts for the second time in two months. The consumer products giant also reduced its profit view as it deals with slowing demand in Europe and China.

"It would be wise to be underweight multinationals with inordinately large exposure to Europe," said Steven Neimeth, a money manager at SunAmerica Asset Management in Jersey City, New Jersey.

"Stocks are reactively more negatively to these outlooks because investors are fearing the worst this coming year," said Neimeth, who helps oversee $9 billion.

While cautious outlooks can make it easier for companies to top consensus estimates, corporate commentary has done little to reassure investors.   Continued...