Earnings of consumer cos may be critical for US stocks
Consumer-oriented companies are early leaders among US stocks this year. Earnings reports that start pouring in from Wednesday are likely to determine whether the group and the market sustain their gains.
By Agencies |
NEW YORK: Consumer-oriented companies are early leaders among US stocks this year. Earnings reports that start pouring in from Wednesday are likely to determine whether the group and the market sustain their gains.
Three Standard & Poor���s indexes that cover everything from makers of food, beverages and drugs to homebuilders and retail chains are all beating the S&P 500, which rose 0.7% for the year. Builders and retailers are part of the S&P 500���s consumer discretionary group, the most sensitive to the pace of economic growth. The category is the best performer of the benchmark���s 10 broadest industry groups, with a 2.9% advance.
Healthcare companies has risen 2.4% and makers of consumer staples, or everyday items, have added 1.9% as measured by industry gauges. These two groups were the worst performers last quarter as the S&P 500 rose 6.2%, its biggest quarterly gain in two years.
At least 13 more will do so through the end of next week, according to data compiled by Bloomberg. By that time, about 30 consumer-discretionary companies and a similar number in healthcare will also release earnings. Analysts expect earnings growth in all three categories to accelerate to 11% this year, based on forecasts compiled by Thomson Financial. The pace exceeds the 8.5% seen for the S&P 500 overall.
None of these groups kept up with the index last year, according to Thomson���s figures. Consumer staples recorded the smallest increase, 6%. Healthcare, at 8%, tied for the second-smallest with utilities. Consumer-discretionary earnings rose 10%.
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Consumer companies that have released fourth-quarter results so far didn���t always provide reassurance that the forecasts were on track. There was some good news from Lennar Corp, the fourth-largest US homebuilder. Chief executive officer Stuart Miller said this year���s earnings may meet or exceed the $3.6 a share for 2006. Since then, an index of S&P 500 builders has gained 7.2%.Healthcare stocks in the S&P 500, on the other hand, dropped for the past two days as Pfizer and Johnson & Johnson reported results. Fourth-quarter profit at Pfizer, the world���s largest drugmaker, tumbled 43% and drug sales worldwide were little changed. Revenue at J&J, the world���s largest maker of healthcare products, rose less than analysts forecast.
In the next week, investors will find out whether these results were the exception or the rule among consumer-products makers. They will also have a better idea of whether all those forecasts behind this year���s stock market gains were justified.
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