US Earnings Optimism Hides Ugly Truth

The mood seems to have soured on Wall Street since its bounce early this morning. And if you peer beneath the headlines, you can see why. The big news has been Caterpillar’s (CAT) earnings, which tripled analyst’s expectations.

But as we look deeper, we find that CAT’s earnings are well below last year’s figures.

Merck (MRK) announced that earnings dropped less than expected. Again, note revenue still dropped 2%. State Street (STT) reported a loss of almost $3.3 billion as it writes down asset values. Coca-Cola (KO) also announced lower earnings, citing stronger dollar.

On the surface, these earnings reports sound good, but they hide the ugly truth.

And the list goes on, from BlackRock (BLK), Freeport-McMoRan (FCX) to Comerica (CMA) and E.I. du Pont Nemours (DD).

Almost every company that we could find reporting earnings today had headlines of proclaiming increased earnings. The sad fact is that these companies have done little more than beat the underestimated numbers of a bunch of Wall Street analysts who weren’t expecting much.

The reality is that while positive, these numbers cover up the sad state of earnings and profits right now. And at the end of the day, earnings are what matter.

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