Afternoon Review

Earnings releases and management commentary all had a similar tone this week. The general consensus amongst firms reporting earnings this week is that the global economy is entering a recession that will last most of 2009. Most companies began to see weakening on a global scale in September, with the weakest demand in automotive, housing, and durable goods markets. Operations across all industries are tightening and capital expenditures are slowing as companies shift into cash preservation and build mode.

Companies seem to be encouraged by the coordinated response by governments and central banks around the world. While most statements showed confidence that government actions will ultimately restore global liquidity, there is a great deal of uncertainty regarding the depth and duration of economic decline as well as the timing and strength of a recovery.

These are obviously challenging times, and they are challenging for companies across all industries. Management statements this week acknowledged the importance of taking advantage of growth opportunities when they present themselves and position themselves for the future.

The market is beginning to distinguish between companies that will see modest growth and those where growth is going to fall off a cliff. In many cases it is easy to pick out the relatively stable businesses from the unstable ones. The companies that are holding up are doing so because they are very high quality companies.


Click here to read a summary of various earnings reports from this week.



Peter Lazaroff, Junior Analyst