CNBC: Weather May Put Damper on Corporate Profits

Thursday, 20 Feb 2014 07:09 AM

By Dan Weil

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The wicked winter weather already appears to have depressed economic growth this quarter, and it may hurt corporate earnings too.

On Jan. 2, analysts' consensus earnings forecast for companies in the Standard & Poor's 500 Index called for a 5 percent increase in the first quarter, according to S&P Capital IQ, CNBC reports. Now the consensus has dropped to just 1.5 percent.

"I think that's kind of shocking when you look at last year, and we were expecting all four quarters [of 2014] to have double-digit growth," S&P Director Christine Short told CNBC. "I think it [the weather] does have impact no matter what sector you look at."

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To be sure, for some companies, weak earnings may reflect more than weather.

"While some of this is due to the weather, we have noted that negative surprises from consumer- oriented companies have been trending higher over the last several quarters," Bank of America Merrill Lynch analysts write in a report obtained by CNBC.

Thomson Reuters' forecast for first-quarter earnings for the S&P 500 has fallen from 7 percent at the beginning of December to 3.3 percent now, according to CNBC.

As for companies suffering purely from the weather, many of them may bounce back quickly, Bank of America Merrill Lynch equity strategist Daniel Suzuki tells the news service.

"From an academic standpoint, the impact of a single month or a couple of months of bad weather isn't huge in terms of the long-term earnings of a company, and it's less bad if you think about the different industries and sectors," Suzuki says.

"Retail is probably going to get a little bounce back as the weather improves whereas in other areas it's lost for good, like restaurants."

Meanwhile, the winter storms wreaking havoc with the lives of people in much of the country also are causing damage to state and city budgets.

States and cities are running low on money and supplies to deal with the storms, according to Time. Governments now have to utilize emergency money or ask for more funds to finance snow removal and salting of roads.

Editor’s Note: 38 Trades That Could Turn $1,000 Into $49,000

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