Economic Review

4/13/09

This is one earnings season that could just be wild and crazy

The upcoming couple of weeks will focus on earnings and guidance announcements from organizations from various industry sectors. Given the drastic fallout in economic activity over the past couple of quarters the expectations are for dismal results. Last week however, a major financial institution, Wells Fargo, simply shocked Wall Street estimates with blow out performance numbers in the profit zone. Now many have scratched their heads as to how this could have transpired given the continued fallout in the real estate market. But more perplexing is the notion that... why did Wells Fargo require government bailout money if it was capable of posting profits over the past few months? This is simply an outrageous scenario.

And that scenario begs the question for other earnings announcements about to hit the tape. With all the massive printing and dolling out of money to a host of organizations, will more companies who were on the brink of bankruptcy somehow, mysteriously post robust earnings? The next question is…where did those earnings really come from?

Stephan Kudyba (MBA, PhD) THE MARKET DOCTOR

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