Democrat and Chronicle from Rochester, New York on October 21, 2015 · Page B4
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Democrat and Chronicle from Rochester, New York · Page B4

Rochester, New York
Issue Date:
Wednesday, October 21, 2015
Page B4
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Crummy corporate earnings don’t have to add up to a really lousy stock market. Sure, Wall Street analysts are forecasting profit growth to contract in the third quarter for the first time since 2009. But how the stock market reacts to corporate earnings reports is more about the level of expectations heading into the earnings-reporting season — and what the outlook is for next year. And right now, expectations for third-quarter earnings are very low and the pro fi t outlook f or 2016 isn’t nearly as dreary. I n Wall Street-speak, that means companies have a better c hance of topping a very low e arnings bar. It also means investors could look beyond the current quarter to future quarters. S ome stock market strategists argue that the current quarter will mark the low point for profits. Others see key headwinds, such as a too-strong dollar and a collapse in energy prices, starting to abate, paving the way for better profits next year. The forecast for third-quarter profit growth for the S&P 500 is -3.9%, which is well below the 7.4% earnings growth analysts were forecasting on Jan. 1, ac- cording to Thomson Reuters. The p oint: Analysts have slashed estimates so much that it’s more likely companies will top the lower forecasts. So far that has been the case, with 71% of the 78 S&P 500 companies that have reported earnings beating expectations, better than the longer-term “beat” average of 63%. Despite the lousy earnings projections, the Dow Jones industrial average has finished higher three consecutive weeks and has gained more than 900 points, or nearly 6%. Gina Martin Adams, a stock strategist at Wells Fargo Securities, thinks weak third-quarter earnings will mark the trough, due in large part to stabilization in the oil patch. “Commodity prices were responsible for more than two- thirds of the earnings-per-share s lowdown over the last 12 m onths,” Adams says. “As long as commodity prices are in the p rocess of bottoming, they will ( have a) more limited drag on earnings going forward.” If you strip out energy sector earnings, which are expected to contract 65% in the third quarter, Adams adds, the rest of the S&P 500 will post positive profit growth. If there’s a risk, it is that the bulk of Corporate America fails to top the lowered profit estimates, she warns. “ If non-energy companies miss expectations, it is a risk to the market, (but) I am not expecting that to happen,” Adams told USA TODAY. Skeptics such as Patrick Adams, a money manager at Choice Investment Management, warn that slowing earnings growth poses a risk to the stock market, as it makes it harder to justify the market’s above-average valuations. SPENCER PLATT, GETTY IMAGES Atrader works at the New York Stock Exchange. In three weeks, the Dow has gained 6%. 4B E3 USA TODAY—DEMOCRATANDCHRONICLE WEDNESDAY,OCTOBER21,2015 CREDIT AGRICOLE TO P AY $78 7M OVER SANCTIONS Crédit Agricoleon Tuesday agreed to a $7 87 .3 million settlement of federal and state allegations that the French banking giant violated U.S. sanctions b y pr ocessing transactions for Sudan, Iran, Myanmar and Cuba. The bank ackno wledged wr ong- doing and agreed to a deferred prosecution deal with feder al prosecutors. HERSHEY’S DOLING OUT BIG KISSES FOR HOLIDAYS Hershey is going big with its iconic chocolate Kisses brand for the holidays. The chocolate maker announced Tuesday that it will sell Hershey’s Kisses Deluxe, a chocolate that is double the size of the standard, diminutive Kisses brand in the U.S. It has a ha- z elnut center and is flecked with rice crisps. The new product is expected to be on store shelv es acr oss the USA by Nov. 5. SUBWAY TO DITCH ALL ANTIBIOTICS IN MEAT BY 2025 Subway announced T uesday that it will cease using any animals raised with antibiotics in their U.S. meat supply by 2025. The sandwich chain, which boasts 27,000 restaurants, says it will begin with a pr e viously announced plan of ending the use of chickens raised with antibiotics next year. MONEYLINE HERSHEY'S USA SNAPSHOTS © Fantasy meeting Source Highfive survey of 1,200 employees JAE YANG AND JANET LOEHRKE, USA TODAY 8% of employees have checked fantasy sports during a face-to-face meeting. INDEXCLOSECHG Nasdaq composite4880.97 y 24.50 S&P 5002030.77 y 2.89 T- note, 10-year yield 2 .07% x 0 .05 O il, light sweet crude $ 45.55 y 0 .34 E uro (dollars per euro) $ 1.1338 x 0 .0010 Y en per dollar119.92 x 0.45 SOURCES USA TODAYRESEARCH, MARKETWATCH.COM 17,100 17,150 17,200 17,250 17,300 17,350 DOW JONES INDUSTRIAL AVG. -13.43 9:30 a.m. 17,231 4:00 p.m. 17,217 TUESDAY MARKETS NEWS MONEY AUTOS TRAVEL SPORTS LIFE SANFRANCISCO Baseball playo s are in full swing, so please indulge me in making a comparison to the financial state of Yahoo. T he old Yankee Stadium was f amously deemed the house that R uth built, a paean to the great h ome run-hitting Babe Ruth. Yah oo, for better or worse the past f ew years, is the house that Yahoo CEO Marissa Mayer is trying to rebuild after years of disrepair a nd neglect. As major reclamation projects go, it’s a work in progress, if Tuesday’s third-quarter results for Yahoo are any indication. Against a backdrop of executive defections and middling online ad sales, the Internet media giant reported improved revenue but earnings that fell short of analyst estimates: $1.226 billion and adjusted earnings of 15 cents per share. Quarterly losses for operations totaled $86 million. Analysts expected Yahooto deliver revenue of $1.024 billion and earnings per share of 16 cents, according to a consensus forecast c ompiled by FactSet. S hares were down 1% to $32.49 in after-hours trading; the stock w as down 2% to $32.82 at the c lose of regular trading Tuesday. For Yahoo CEO Marissa Mayer, now in her fourth year at t he helm, it’s just another rough quarter with little relief in sight. Yahoo continues to lose the digital ad wars. This year, its take of the worldwide market will sink to 2% (or $3.37 billion) from 2.4% ( $3.45 billion) in 2014, according t o eMarketer. Facebook’s share, meanwhile, is expected to improve to 9.6% from 8% last year. M arket leader Google will de- c rease slightly this year, to 30.4%. M obile ads remain a focus of Yahoo, but it owns a paltry slice (2.9%) of the $30.45 billion U.S. market, which is expected to drop to 2.5% in 2016. For 2015, Google is at 32.9%, Facebook at 19.4%. The worries don’t end there. Jittery analysts, many of whom believe Yahoo shares are under- v alued, want to learn more about Yahoo’s planned spino of its s take in Chinese e-retailing giant Alibaba. They see potential, even though the Internal Revenue Service did deem it a tax-free move in advance of the spino . Tuesday, Mayer said the spino probably won’t happen until January. T here was good news: Yahoo signed a three-year, non-exclusive deal with Google to provide s earch ads. But that didn’t stop a drop in after-hours trading. T o borrow another baseball analogy, Yahoo’s big hit of the day w as quickly erased. And so it goes for the struggling tech giant. Rough going continues for Yahoo House that Mayer rebuilt remains a work in progress Continuing an e ort to battle taxpayer identity theft, IRS and tax industry leaders said Tuesday they’ve tested more than 20 new data elements on tax returns that w ill be used in 2016 to prevent fraudulent refunds. T he new safeguards, part of an unprecedented public-private information sharing, mark the latest e ort to halt a years-long surge in tax refund fraud, including an embarrassing breach in which cyber-thieves stole as m uch as $39 million in federal refunds based on taxpayer information hacked from an IRS website. T ax return preparation firms and other industry participants w ill share the data with the IRS and state tax agencies at the time o f electronic filing, members of the so-called security summit s aid. Elements include: u Reviewing the transmission of tax returns, including any improper or repetitive use of Internet Protocol numbers, the electronic address where the return originated. u Examining computer device identification data linked to the return’s origin. u Checking the time it takes to complete a tax return, an e ort d esigned to detect signs of computer mechanized fraud. u Capturing metadata from the computer transaction that will allow review for fraud related to identity theft. Also, IRS and industry o cials s aid tax software providers have agreed to strengthen validation requirements for new and ret urning customers by toughening password standards and imple- m enting other measures to guard against account takeover by crim- i nals filing fraudulent tax returns. Passwords will require a mini- m um of eight characters with uppercase, lowercase, alphabetic, numerical and special characters. T hree security questions will be added to the software, and a new timed lockout feature will limit u nsuccessful log-in attempts, the o cials said. I RS Commissioner John Koskinen said the new safeguards are n ot expected to cause a “sea change” in the time it takes for t axpayers to file their returns e lectronically. More than 34 state departments of revenue and 20 tax industry members have signed memorandums of understanding regarding their roles in the information-sharing, the IRS said. The anti-fraud e ort comes amid budget cuts that have ham- p ered some IRS taxpayer services. The National Taxpayer A dvocate’s o ce reported in July that the 2015 filing season was the worst in memory, as phone calls dropped by the IRS switchboard soared, rates of calls answered fell sharply and the length of call waiting times rose. K oskinen characterized the crackdown on identity-theft fraud as a priority that would m ove forward. But he said other IRS services could su er, even w hile predicting the new security measures would give taxpayers “ more protection than ever when they file their tax returns.” IRS combats tax refund cheats with new plan Kevin McCoy @kmccoynyc USA TODAY DANIEL ACKER, BLOOMBERG Cyber-thieves stole as much a s $39 million in federal ref unds based on information hacked from an IRS website. A year ago, Wall Street was for e- casting third- quarter 2015 S&P 500 pr ofit gro wth of 15.4%. T oday , a nearly 4% pr ofit contraction is e xpect- ed in Q3 2015. OCT. 1, 2014 PROJECTION +15.4% JAN. 1 +7.4% APRIL 1 +2.2% JULY1 -0.3% OCT. 1 -4.2% TUESDAY -3.9% SOURCE: THOMSON REUTERS ANALYSTS LOWER EARNINGS BAR With Q3 expectations low, investors can look ahead to higher profits in the future Adam Shell USA TODAY NOWHERE TO GO BUT UP Despite the lousy projections, the Dow Jones industrial average h as finished higher for three consecutive weeks. Jon Swartz USA TODAY FIRST TAKE JUSTIN SULLIVAN, GETTY IMAGES Marissa Mayer says Yahoo is narrowing its strategy and p roducts to improve sales growth. GETTY IMAGES Mayer

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