Canaccord Genuity Morning Coffee on Portfolio Strategy: Set The Bar Low

July 11, 2012 10:14 AM EDT
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Canaccord Genuity Morning Coffee on Portfolio Strategy: Set the bar low.

Canaccord Genuity U.S. Portfolio Strategist Tony Dwyer has provided a look into the Q2/12 earnings season. He notes that it is hard to imagine any upside catalysts as the success of the June European Summit was fleeting, the domestic economic data is slowing, earnings estimates are being reduced, the China growth engine is not running on all cylinders, and the “fiscal cliff” is looming. As such, the second-quarter earnings season kicked off this week with very low expectations. In fact, Dwyer notes that the Q2/12 bottom-up S&P 500 operating EPS estimate has come down from 9.2% on April 1 to the current estimate of 5.7%. According to Thomson Reuters, absent the easy comparison for Bank of America (NYSE: BAC), EPS would be roughly flat from a year ago. He says that it is important to point out that other than from the third quarter of 2007 to the fourth quarter of 2008, the final results were above the beginning of the quarter estimate by a meaningful margin in every quarter. All in, Dwyer says that the point is that unless in the heart of a recession, estimates at the beginning of the quarter are typically too low – and he doesn’t expect this one to be different until proven otherwise.

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