Revenue misses continue
Revenue misses from MSFT, AMZN, KLAC, AXP and BNI has the futures below fair value but well off their lows as European stocks rallied at around 4am when Germany’s July IFO business confidence number was released and was almost 1 point more than expected rising to the highest level since Oct ’08. Also, the Euro Zone manufacturing and services composite index was 1.5 points higher than forecasts and at a 10 month high at 46.8 with 50 being the breakeven between expansion and contraction. In response, the euro is rallying to the highest level since early June vs the US$ and the $ index is just shy of its lowest level since Sept ’08. Don’t discount the possibility that Europe recovers more quickly than the US does as their consumer base is much less leveraged and exports (particularly in Germany) are a key driver, especially to Asia. UK Q2 GDP fell more than expected, by 5.6% y/o/y. A slightly better than expected Q2 GDP report from South Korea helped to buoy Asian markets as the Shanghai composite rose to a fresh 13 month high for a 3rd straight day. The final U of Michigan confidence figure is expected to rise to 65, a touch above the preliminary report.
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July 24th, 2009 at 8:59 am
Revenue misses should not be a surprise. Companies are attempting to right size their firms to a business level that appears to be around the 2003 or 2004 time frame. One questions is when will companies begin seeing year over year growth compared to the lower bar established in this earlier time period. Companies appear to have successfully cut the cost side of the equation so revenue stability/growth is one of the next critical variables. I believe revenue growth, YOY to 2003/2004, is highly probable in the 4th quarter this year or 1st quarter 2010. Extrapolating this to other economic factors, like the important jobless claims, will be critical in forcasting the strength and sustainability of a recovery.
July 24th, 2009 at 9:48 am
@DI
“Companies are attempting to right size their firms to a business level that appears to be around the 2003 or 2004 time frame.”
I agree with that assessment…
However, what worries me is that 2003-2004 basically began the “ramp-up” phase of the housing bubble…Jobs were not a factor either (as many of the jobs were either in construction, finance, or service sectors that supply both)…So it would seem to me that a RESET to 2003-2004 won’t be sufficient to reflect potential “growth” unless those other economic inputs come back…
Note: you have to further consider things such as a long sustained rise in stock markets starting in 2003, (which helped consumer confidence psychologically), ubiquitous credit and standards thereof, and robust buying of US Debt by China & other nations…
In the back of my head, I fear that “right sizing” may have to go all the way back to 1990 levels before all is said & done…