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Earnings Season Preview: Companies Lower Guidance to the Basement


Slowdowns from Europe and China were expected, but have turned out to be worse than feared.

Editor's Note: The following was posted in real time on our premium Buzz & Banter (click for a free trial).

MINYANVILLE ORIGINAL There have been constant warnings about negative earnings growth as the result of slowing demand and China or European worries. Here is a general list of companies that have lowered or cautioned guidance so far.

Over the Past Three Weeks:
  • FedEx (FDX) guided to the very bottom of the range for the full year and well below for the next quarter, even assuming the lofty US growth goals. It also saw increased headwinds from a higher currency and low rates that would negatively affect its pension plans.
  • Ryder Systems (R) cut guidance on reduced demand, primarily in its rental line.
  • Bed Bath & Beyond (BBBY) reported poor earnings and not-so-pretty guidance, but got absolutely hammered.
  • Nike (NKE) reported poor earnings in its Asian and European divisions as well as soft guidance on future orders.
  • Ford (F) losses for the 2Q in Europe, South America and Asia may triple from the 1Q. North American demand still remained strong in its view.
  • Samsung reported higher operating profits, but sales that missed estimates. The company guided lower on below estimated TV sales.
  • Informatica (INFA) raised its stock repurchase program by $100 million, but lowered guidance so far that it wasn't even in the ballpark of estimates. A stock buyback while it cuts guidance? You've got to be kidding me!
  • Dover (DOV) lowered guidance by about 3% citing weaker demand from Europe and lower exchange rates.
  • WD-40 (WDFC) lowered guidance on worries within European markets after reporting lowered than expected earnings for the 2Q.
Tuesday, July 10:
  • Advanced Micro Devices (AMD) lowered guidance by 11% on softer China and European sales as well as a weaker consumer buying environment that will hit manufacturing.
  • Applied Materials (AMAT) lowered its forecast for the year to the bottom end of the prior estimate on weaker near-term demand from its semiconductor equipment business.
  • Cummins (CMI) increased its dividend by 25%, but lowered guidance by over 10% as order trends have weakened. It saw decreased demand in Brazil, China and India as well as lower orders from the US. It also noted a negative impact on its business due to the higher dollar.
Wednesday, July 11 and Thursday, July 12:
  • Adtran (ADTN) cited a challenging environment as carriers have cut back on their spending and cut revenue guidance for the 3Q by almost 20%. The company noted deteriorating customer sentiment and wacky (my word) business cycles.
  • Infosys (INFY) lowered guidance by about 5% in dollar terms as the company noted global currency demand as a major headwind (it is a global tech company based out of India). The company also missed sales forecasts.
  • Supervalu (SVU) missed earnings estimate by a very wide margin, suspended its dividend, and withdrew guidance. The company stated that it saw softness in consumer spending and even threw out talk of bankruptcy (though stated it was not a viable option). The stock is down over 40% today.
  • Calix (CALX) cut guidance by 17% at the midpoint, reflecting a softness in demand on multiple customer markets. The company cited the slowdown due to "macro-economic conditions and uncertainties of regulatory reforms."
  • Chevron (CVX) cited lower upstream revenues due to lower than average crude prices, but partially offset by FX gains. However, downstream gains are larger than expected due to higher refining margins and larger gains on asset sales.
  • In Europe as well, Peugeot cut 8,000 jobs after it closed a factory in France. The company cited a high debt load and European car sales sinking to a 20-year low.
All in all, it seems that while a negative earnings season -- with companies missing by as much as 10% -- has long been suspected, the severity of the lower guidance and misses are what has caused the market to sell off. This will be key to watch going forward.

Twitter: @MichaelSedacca

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No positions in stocks mentioned.

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