NEWS AND COMMENTARY
March 1, 2001
The Never-Ending Story: Earnings Warnings
Earnings bombshells are dropping so fast and furiously that Wall Street is looking like a war zone! The latest casualties, Gateway, 3Com, and USAir took the plunge last night to warn of less-than-stellar earnings for this quarter. And what a plunge it was! In early trading, Gateway fell nearly 10%, 3Com dropped 17%, and USAir shed more than 4% of its value. Investors are looking for any reason to shoot down share prices, and these three companies certainly gave them enough ammunition.
This is already Gateway's second warning for this quarter. Plus, the company had to restate its earnings from last year because it used some of those accounting tricks we've been telling you about -- it booked investment gains that, in reality, were losses.
The outlook for future earnings isn't turning around, either. We told you last year that companies would continue down the warning path throughout the first half of 2001. It could be even longer than that! The economy hasn't showed any signs of recovering. In fact, with consumer confidence and investor sentiment bracing for a full-blown recession, there is no chance for companies to even begin the process of improving profits.
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