Lombardi Publishing Corporation (www.LombardiPublishing.com), a 28-year-old consumer publisher that has served over one million customers in 141 countries, is warning that the major U.S. stock market indices may have topped after one-third of S&P 500-listed companies reported a year-over-year decline or no change in fourth-quarter 2014 revenue.
“Since bottoming in March 2009, the S&P 500 has roared back, soaring 184%, and continues to trade near record territory,” says economist and lead contributor Michael Lombardi. “Unfortunately, the direction of the S&P 500 does not give a complete picture of how the U.S. economy is actually doing.”
Lombardi explains that instead of being supported by strong economic growth, the bullish stock market indices are being propped up by financial engineering and the sentiment of the Federal Reserve.
“In an effort to boost earnings per share, companies on U.S. exchanges are logging record-high share buyback activity; in 2013, share buyback activity hit $460 billion, the highest level since 2007,” he adds. “Companies are cutting cots and increasing their share buyback activity to increase earnings because revenue growth just isn’t there.”
In the fourth quarter of 2013, 144, or 28.8%, of S&P 500 companies reported an outright decline or no change in their revenue from the previous year. So far, in the first quarter of 2014, 84% (93 out of 111) of companies have issued negative EPS guidance, the second highest level since 2006. The current record is 85%, which was recorded in the fourth quarter of 2013. (Source: “Near record high number and percentage of S&P 500 companies issuing negative EPS guidance for Q1,” FactSet web site, March 31, 2014; www.factset.com/insight/2014/3/guidance_3.31.14#.U0axNfldXpw.)
“While almost one-third of companies reported no revenue growth in the fourth quarter of 2013 the first quarter of 2014 is looking just as dire, with roughly 20% already issuing negative earnings guidance,” Lombardi concludes. “At the sector-level, the industrials, at 93%, have the highest percentage of companies issuing negative EPS guidance for the quarter. This data should not be taken lightly, and cause investors concern,”
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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