Analysts Cut Estimates for Almost Half of Stocks, JPMorgan Says

By Alexis Xydias

Nov. 19 (Bloomberg) -- Analysts have cut profit estimates for 48 percent of stocks they cover worldwide, the most in at least 15 years, and more downgrades are likely as the economy slows, JPMorgan Chase & Co. said.

Predictions of next year's earnings were reduced for 60 percent of U.S. stocks in the four weeks through Nov. 11, according to a report by JPMorgan quantitative analysts in London. In Europe, 44 percent were downgraded, the study, which covers data since 1993, said. Some 11 percent of global profit estimates were raised in the period.

Investors preceded the downgrades by dumping equities this year as analysts appeared late in assessing the effect of the global recession on company earnings. The MSCI World Index tumbled 19 percent in October, its worst monthly performance ever, following a 12 percent decline in September.

``While analysts seem to have finally cut their expectations sharply they are still not in line with the pessimistic investors' expectations,'' Marco Dion, who led the research, said in the report dated yesterday. ``Given the current economic landscape there is however very little reason to imagine many stocks will be receiving upgrades.''

Companies from chipmaker Intel Corp. and J.C. Penney Co., the third-largest U.S. department-store company, to Swiss Life Holding, Switzerland's biggest life insurer, have scrapped their own forecasts or indicated the credit-market crisis has filtered through to the wider economy and is hurting sales.

U.S. companies reporting earnings this quarter have missed analyst expectations by about 15 percent, according to Bloomberg data. In western Europe, profit has missed estimates by about 8.8 percent, the data show.

Analysts now expect companies in the Standard & Poor's 500 Index in the U.S. to post an annual profit decline of 9.5 percent this year, followed by an 11 percent rebound in 2009, Bloomberg data show. For Europe's Dow Jones Stoxx 600 Index, the 2008 estimate calls for a profit drop of 10 percent, with earnings growing 5.6 percent in 2009.

To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net.