Lombardi Publishing Corporation ( — www.LombardiPublishing.com), a 29-year-old consumer publisher that has served over one million customers in 141 countries, is warning that the stock market remains vulnerable as fourth-quarter revenue growth amongst S&P 500 companies is forecast to collapse by 68%.
“While public companies can manipulate their per-share earnings with stock buyback programs and other tricks, like reducing their capital expenditure budgets, there is little companies can do to mask revenue growth,” says economist and lead contributor Michael Lombardi.
For the fourth quarter of 2014, S&P 500 companies are expected to report anemic revenue growth of just 1.1%; that’s 68% below the average revenue growth reported over the past three years of 3.5%. (Source: “Earnings Insight,” FactSet.com, January 9, 2015.)
Lombardi explains that weak revenue growth means companies are having a difficult time selling more goods or services and/or are facing challenges attracting more customers. At the very core, poor revenue growth is a reflection of poor economic growth. On top of that, more and more companies are providing a negative outlook for their corporate earnings; the percentage of companies on the S&P 500 that have issued negative earnings per share guidance is 81% (87 out of 108), well above the five-year average of 68%.
“Earnings growth expectations are also collapsing. At the end of September 2014, analysts had expected S&P 500 companies to show earnings growth of 8.4% in the fourth quarter of 2014. Now, they expect this rate to be only 1.1%,” he adds. “Companies on the key stock indices have built up massive cash positions. As a result, in 2015, I expect to see public companies continue to buy back their stock in an effort to prop up per-share earnings.”
“Taking all of these key factors—non-existent company revenue growth, earnings growth propped up by stock buyback programs, and a lack of old-fashioned business growth via investing—into consideration, I continue to be very negative on equities for 2015,” 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.
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