Wall Street Is Pretty Sure That Earnings Season Will Be Crappy

It's that time again when everyone prepares for earnings season, the time of year when corporations publish their quarterly financial results.

In recent years, analysts and strategists across Wall Street have warned us that the next quarter at the time would be the ugly one that could break the back of the bull market.

However, they've been repeatedly proven wrong, and the stock markets have only charged higher.

But will it be different this time?

Well, the signs aren't looking too bullish.

Weeks before aluminum giant Alcoa unofficially kicks off earnings season, we hear from the "early reporters," or the companies whose quarter ends in May (rather than June for most companies).

"21 May quarter end companies reported 2Q results, 62% beat consensus EPS w/ a 1.7% surprise in aggregate," wrote Deutsche Bank's David Bianco in a note to clients this week.  "The surprise was slightly below the last few quarters. Aggregate y/y EPS growth was 7.9% and 5.8% for revenue; this would be healthy S&P growth, but early reporters normally exceed the S&P."

Here's a round up of the early reporters:

Deutsche Bank

Morgan Stanley's Adam Parker are among the analysts who believe Wall Street is currently too optimistic about corporate earnings.

"Downward earnings revisions have persisted in recent months with 7 of 10 GICS sectors seeing lower estimates over the last 3 months, and we continue to believe estimates have further to fall," said Parker. "Analysts are embedding 7% earnings growth in 2013 to $111 per share, followed by 11% growth in 2014 to $123 per share. Our top-down estimates are more muted— $103 and $110 of earnings per share in 2013 and 2014, respectively."

Like Parker, Citi's Tobias Levkovich has been pointing to the surge in negative preannouncements relative to positive preannouncements.

"[W]e have been a tad shocked by the surge in negative-to-positive preannouncement trends that make 2009’s surge appear less worrisome in retrospect," said Levkovich. "Upward earnings guidance has dipped as well and there has been little consternation or discussion about it."

Alcoa announces its second quarter earnings on July 8.

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