Wells Fargo (NYSE:WFC) Says Analysts’ Downward Revision of Earnings Closer to the Mark This Quarter

Wells Fargo (NYSE:WFC) analyst Scott Wren, who is senior equity strategist at Wells Fargo Advisors in St. Louis, said the downward revision of earnings by analysts should result in earnings estimates closer to reality than in the recent past, which they have missed by quite a bit over the last 16 months.

Wren said the estimates from analysts entering into 2009 were from $20 to $30 over what the reality was, and he feels this season of time estimates are probably more in line with the performances of the companies.

Original analysts’ estimates earlier in the year were for earnings for S&P 500 companies to increase by 37.2 percent, now they’ve revised those slightly downwards to 36.3 percent. But in October they had estimated earnings of 51.2 percent, so from that time they’re far less optimistic and in line with reality at this time than they were then.

Even those numbers seem high to me, but we’ll see when the data are released. There have been no jobs added to the economy, and unemployment has stayed where it’s been, so unless consumers have really started spending again, it’s hard to believe earnings could be this high, although it could be from businesses continuing to eliminate jobs and cutting costs even more; the likely scenario if earnings are that high.

The other possibility is businesses could be spending a lot more in anticipation and hope American consumers will start spending, and so may have increased replenishment orders as a result, generating earnings for those companies providing what they need.

Earnings guidance will launch on April 12 when Alcoa (NYSE:AA) starts things off. At this time there are still many more S&P companies which have provided more of a negative sentiment, with
70 of them preparing shareholders for disappointing numbers, while 55 say they’re on a positive footing.

As with everything in the economy at this time, this is all mixed, and we really have no idea what the reality will be until it unfolds before our eyes on an up to date basis.

There is too much volatility to count on guidance and possibilities, as things are going up and down far too much for a leveling off that can be more predictable. We’re still in for a rough ride, and guidance will have to be taken with a grain of salt until things are smoothed out more.

It’ll be interesting to see if the expectations of analysts are still wishful thinking or accurate this time around.