Profits on Track to Show Gain

With nearly 80% of blue-chip companies reporting so far, second-quarter earnings remain on track to show an overall year-over-year gain--the first since the fourth quarter of 2000.

But corporate warnings about disappointing third-quarter results are running at an above-normal pace, which could become an obstacle for the resurging stock market, analysts say.

As of Tuesday morning, 395 companies in the Standard & Poor’s 500 index had reported their quarterly results. Of those, 62% beat analysts’ expectations, while 13% missed estimates and the rest were on target, according to earnings tracker Thomson First Call in Boston.

On average, profits were up 0.8% from the second quarter of 2001, ending the longest losing streak for blue-chip earnings--five straight quarters of declines--since 1969-70, First Call said.

Profits also are expected to rise in the current quarter: The average S&P; 500 gain from a year earlier will be about 12%, analysts now estimate. But companies themselves may not be so sure.

In the second quarter, about 1.3 companies warned that profits would miss Wall Street’s forecasts for every firm that boasted it would beat expectations. That was the lowest ratio First Call had seen since it began tracking such data about seven years ago.

Now, the ratio is inching up again: So far in the third quarter, about two companies have warned they’ll miss for every one company that says it will beat estimates.

But some experts say companies are intentionally playing it safe, given regulators’ focus on honesty in corporate reporting of results.

“Managements are bending over backward to be conservative, but the economy is doing much better than the stock market would be suggesting,” said Kevin Bannon, chief investment officer at BNY Asset Management. “Earnings will be pretty good.”

Investment Advisor

Faces Court Order

Securities regulators have won a court order to force a San Diego investment advisor to honor subpoenas investigating his claims that his contrarian investment style made clients “multimillionaires” despite the long bear market, officials said Tuesday.

U.S. District Judge Gary Feess ruled Monday that Scott Fraser, who runs an investment newsletter called “The Natural Contrarian,” must comply with subpoenas issued by the Securities and Exchange Commission in May.

The SEC has been investigating Fraser for possible violations of federal securities laws and whether his claim to have made more than 1,000 of his subscribers into “multimillionaires” was true.

Also being probed are his assertions that his stock picks in the oil and gas sector increased by 1,805%, and that the vast majority of his recommendations had more than doubled, the SEC said.

After Fraser failed to respond to its administrative subpoenas, the SEC went to court to seek an enforcement order. Failure to comply with that federal court order could bring contempt charges, said Lisa Gok, assistant regional director for the SEC in Los Angeles.

A call to “The Natural Contrarian” newsletter seeking comment was not returned.

Reuters

Briefly

Woodland Hills-based Panavision Inc. said Tuesday it won’t fight the New York Stock Exchange’s decision to delist the shares. They will trade over-the-counter beginning Monday.