Earnings and V-shape recovery

June 25, 2009

It may be some weeks since investors have written off the prospect of a V-shaped economic recovery, but equity analysts still expect corporate earnings to go through a very sharp V-shaped rebound.

According to Thomson Reuters data, earnings are expected to shrink 34.5 percent in Q2 and 21.4 percent in Q3, before growing a whopping 180.2 percent in Q4.

That would bring the full-year 2008 earnings contraction rate to just 11.2 percent.

“It is clearly positive that a depression is no longer feared. However, this is more or less compensated for by the forecast that the global economy will not grow by enough in 2010 to achieve the earnings growth that the markets are currently making allowances for,” ING Investment Management said in a note to clients.

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Wishful thinking?