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Lombardi Publishing Corporation (www.LombardiPublishing.com), a 29-year-old consumer publisher that has served over one million customers in 141 countries, warns that first-quarter earnings are projected to fall 4.6%; this would represent the biggest drop since 2009.“With the first quarter of fiscal 2015 just completed, it’s now time for corporate earnings report season. Unfortunately, Wall Street is expecting the biggest decline in public corporate earnings since 2009,” says economist and lead contributor Michael Lombardi.
For the first quarter of fiscal 2015, ended March 31, year-over-year earnings of the S&P 500 companies are expected to decline by 4.6%. This will be the biggest decline in earnings since 2009. On top of that, revenue is expected to decline 2.7%. While a fall in revenue means companies aren’t able to sell more, it also shows that demand in the economy is declining. (Source: Butters, J., “Earnings Insight; S&P 500,” Factset.com, April 2, 2015; www.factset.com/websitefiles/PDFs/earningsinsight/earningsinsight_4.2.15.)
Lombardi explains that weak earnings and revenues aren’t the only reason why investors should be cautious. Valuations are also extremely stretched. One important economic gauge, the price-to-sales multiple, is an indicator that shows how much investors are willing to pay for each dollar of revenue a company generates.
In April, the average price-to-sales multiple of all S&P 500 companies stands at 1.80. This means that for every one dollar of revenue, investors are willing to pay $1.80. This is the highest number since at least 2000. That said, 1.80 is just the average; certain sectors and companies are stretched well beyond this level.
“Right now, investors are faced with three major negative factors: falling corporate profits; a contraction in corporate revenue; and a sky-high price-to-sales multiple,” Lombardi adds. “Furthermore, investors are too complacent about the global economic slowdown. They don’t care about what’s happening outside the U.S., which is a mistake.”
“Most companies listed on the key stock indices have significant operations outside of the U.S. If the global economy continues to face headwinds, their revenues will slow and eventually their profits will take a hit,” Lombardi concludes.
Founded in 1986, Lombardi Publishing Corporation, which has served over one million customers in 141 countries, is one of the largest consumer information publishers in the world. For more information on Lombardi Publishing Corporation, visit www.LombardiPublishing.com.
Contact Info:
Name: Wendy Potter
Email: Send Email
Organization: Lombardi Publishing Corporation
Address: 350 5th Avenue, 59th Floor, New York, NY 10118
Phone: 905 856 2022
Website: http://lombardipublishing.com/
Release ID: 80322
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