Morgan Stanley is calling for a full-blown earnings recession, while many other analysts see one negative quarter and a return to positive profit growth by the second quarter.
div > div.group > p:first-child"> Michael Wilson, Morgan Stanley's chief U.S. equity strategist, says he's looking for two or more quarters of negative or flat growth, meeting the technical definition of a recession. Wilson, in a note, says first quarter earnings could be better than the forecast 4% decline in S&P 500 profits because of the propensity of companies to beat estimates.
The ratio of companies offering negative guidance compared to those forecasting positive results is the highest since the first quarter of 2016, the last year with quarters of negative earnings growth. At 3.3 times, the ratio is also above the average since 2005, supporting the view that companies should have 'lackluster' beats this quarter.
Morgan Stanley's Wilson also looked at sector level earnings expectations and said they are much worse in the first quarter than they were in the fourth quarter, when every major sector had positive earnings growth and just one had negative sales growth.
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