Second quarter is almost over, but what companies earned is a guess

Next week brings an end, mercifully, to the first half of 2020.

That’s the good news. The bad news: Wall Street is as clueless as it has ever been on what earnings will look like.

I’m not talking about the third and fourth quarter. The second quarter is nearly over, and analysts still have no idea what earnings companies will be reporting.

And it’s likely the confusion will continue into the second half of the year.

With 40% of the S&P 500 companies declining to provide guidance, the disconnect between analysts estimates has rarely been wider.

Refinitiv is still projecting about a 43% drop in second-quarter earnings, the worst since the fourth quarter of 2008 — during the Great Recession.

How difficult is it to figure out what corporate earnings will look like? A recent analysis by CNBC earnings editor Robert Hum showed enormous differences between the high and low estimates for the largest stocks in the S&P 500 — magnitudes of order larger than historical norms.

Take IBM. Mean estimates for the quarter are at $2.06, but the difference between the high estimate, $2.49, and the low estimate, $1.47,  is $1.02. The averages estimate range for IBM in 2019 was 15 cents per quarter.

The analyst-estimate range for the second quarter is seven times larger than normal.

This is not unusual. Take JPMorgan, where analysts are expecting a mean estimate of 99 cents. But the difference in estimates for JPMorgan from high to low is $2.21 — from a gain of $2.04 to a loss of 17 cents. The average range in estimates for 2019 was 26 cents.

The second-quarter analyst estimate range is nine times larger than normal.

Same with General Motors, where the analyst-estimate range is five times larger than normal. Or Caterpillar, where it is also five times larger than normal.

The most extreme examples of cluelessness can be found in airline stocks. One example: Estimates for United Airlines range from a loss of $2.35 to a loss of $16.77, a difference of $14.42. The average difference between high and low estimates for United in all four quarters of 2019 was 46 cents.

For Peter Cecchini at Alpha Omega Advisors, who has been following markets for decades, the cluelessness is understandable.

“This is an unprecedented shock,” he said. “Analysts are highly dependent on company guidance. When company management is clueless about their earnings, you can’t expect analysts to have a clue.”

Cecchini also pointed out that companies are being hurt and helped by big differences in how the coronavirus is impacting them and even the degree of help they receive from the massive federal stimulus.

He pointed to the JPMorgan estimates. “Analysts who have the higher estimates likely believe that stimulus will prevent higher levels of loan defaults, whereas those who have…