Earnings Season Provides (Mostly) Positive Outlook

By Eric Fox | October 20, 2009 AAA

Looking at selected commentary from a wide range of companies in different sectors during earnings season presents investors with a generally positive view of the trend of the economy, and may help them decide where to put their investment dollars.

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This commentary is especially welcome considering the economy is in the second worst downturn of the last hundred years.

Economic Optimism
(Nasdaq:GOOG) is definitely in the optimistic camp. Eric Schmidt, the CEO, said during the third quarter conference call that "we believe the worst of the recession is behind us and we're seeing lots of signs of that in all of the industries that we pay attention to. So we're very optimistic now about the future."

The company wasn't just blowing smoke, and Google saw 7% year-over-year growth in revenue as well. Google is also not contributing to layoffs and plans on hiring to implement what it calls its "innovation agenda."

Goldman Sachs (NYSE:GS) was also optimistic about the blooming economy. "Although the world continues to face serious economic challenges, we are seeing improving conditions and evidence of stabilization, even growth, across a number of sectors," said Lloyd Blankfien, the CEO.

Intel (NYSE:INTC) has positive comments on the personal computer cycle during its conference call. Management said that the cycle is "recovering nicely" and pegged the bottom in the first quarter of 2009. Microprocessor revenue excluding the Atom chipset has grown 23% since that bottom.

Not So Optimistic
Not all companies had positive things to say. Halliburton (NYSE:HAL) also reported its earnings last week, and while David Lesar, the CEO, was optimistic that the trough of this cycle "will not match previous cycles in terms of duration and depth" for the company's international business, the business is still facing tough times.

"We believe operators will not materially increase their spending levels despite stable commodity prices without compelling evidence of recovery in hydrocarbon demand. As a result, they continue to reduce capital expenditures by deferring projects and exerting pressures on the oil service companies to improve their project economics," said Lesar.

Revenue Drops
Gannett Inc.
(NYSE:GCI) just reported its quarter, and the company saw a 28% drop in advertising revenue compared to the same quarter last year. Although this was "less worse" than the previous quarter's decline, it shows how far the industry is from growing ad revenue again. Management did note that the quarter had "better than anticipated results due primarily to better trends in advertising and greater efficiencies across all of our business segments."

The Bottom Line
Investors spend much time scouring management commentary during earnings season to discern clues about the company's performance, and examine trends in the economy, in an attempt to get an edge on other investors. These comments have been mostly positive during the first part of earnings season.(For additional reading, check out Top 9 Questions Investors Should Ask Management.)

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