Wave of Companies Issue Earnings Warnings

Published January 14, 2015

The number of companies that issued negative outlooks outnumbered those that upgraded their earnings forecasts by more than two to one last week, according to Reuters Estimates.

Cyclical consumer goods and technology companies made up 42 percent of the downgrades, citing inventory build-up, pricing pressure and weak sales as the reasons for the earnings shortfalls.

The negative earnings pace continued on Tuesday as communications chip maker Conexant (CNXT) lowered its quarterly earnings forecast, and Veritas Software Corp (VRTSE) reported preliminary quarterly results below estimates.

Of the 31 S&P 500 companies that had reported second-quarter results by the end of last week, three had missed estimates and 26 had beat them by an average margin of 7.6 percent.

Wall Street has forecast earnings growth of 25 percent for the broad Standard & Poor's 500 Index (search) for the second quarter, but the slew of profit warnings could be sobering for the markets.

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