Earnings calls this quarter lacked the consensus of prior periods when
upbeat commentary on global growth prospects was nearly unanimous.
While some management teams cited slowing economic growth and the
possibility of a global recession, others reported no deceleration in foreign
market end-demand for their products or suggested that the US slowdown
was just now spilling into developed and emerging markets. Commentary
on the economic outlook for Europe was notably bearish
2. Consumers spending less and trading down
Comments from management teams across all ten sectors focused on the
impact of weakening consumer sentiment and spending both in the US
and around the world. While food and energy prices are becoming less of
a weight on consumers, rising unemployment and falling home prices are
dampening spending in discretionary and seemingly non-discretionary
categories. Consumers are looking for value and "trading down."
3. Gov't intervention helping weak banks most
Many management teams shared their perspectives on the recent US
government intervention in the Financial system.
Some banks applauded
recent policy action while others questioned the impact on stronger
banks versus weaker banks and lamented the lack of focus on the key
issue of declining home prices.
4. Credit crisis increasing balance sheet focus
The recent credit market crisis played a starring role in 3Q earnings calls,
with management teams in all sectors focusing on balance sheet and
liquidity issues. Even companies with rock-solid balance sheets and no
short-term financing issues felt the need to reassure investors that they
had access to capital. The impact of the credit crisis was also apparent in
commentary on reduced plans for near-term M&A, capex, and buybacks.
5. Forecasting ability hampered by uncertainty
Management earnings guidance for future quarters was not only weak, but
also was severely lacking in specifics and confidence. Countless
management teams declined to offer forward-looking earnings guidance
because of the difficulty of forecasting in the current environment. Others
candidly commented that any guidance provided was given with a low
level of conviction."