Recession Beats Back Companies’ Optimistic Forecasts
The recession is forcing the biggest U.S. companies to acknowledge that forecasts made last year were too optimistic and that demand for products ranging from computer chips to linens is falling faster than projected.
Wal-Mart Stores Inc., the world’s biggest retail chain, will miss its fourth-quarter profit forecast after December sales at stores open at least a year came in short of analysts’ estimates. Intel Corp., the largest chipmaker, reported a 23 percent drop in fourth-quarter sales yesterday, steeper than a November projection. Time Warner Inc., the largest media company, will report its first annual loss in six years because of a $25 billion writedown and falling AOL and print ad sales.
“Companies are going to have to continue to adjust their forecasts until our current macro environment stabilizes,” said John Praveen, chief investment strategist at Prudential International Investments Advisers LLC, a unit of Prudential Financial Inc., which manages about $602 billion. “General expectations were that we were probably going to see earnings disappointments and downgrades with the global recession.”
Winemakers, retailers and strip clubs are reporting shortfalls or reducing projections as the recession squeezes consumer spending. The economy changed “very quickly and dramatically,” leaving companies short of where they thought they’d be, said Chris Marangi, an analyst for Rye, New York- based Gabelli & Co., which manages $26 billion.
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