REMINDER: Q1 Earnings Season Starts Next Week And It Will Be Ugly

We've written about this quite frequently on Business Insider.  But in case you haven't kept up, Q1 earnings are expected to decline 0.1 percent year-over-year.  This is according to FactSet's earnings estimates data for the S&P 500.

Q1 Earnings Season Preview

Analysts expect to hear about two major themes this season: 1) higher energy and input costs and 2) weakening demand from the emerging markets and Europe.

Alcoa unofficially kicks off earnings season next Tuesday and it'll certainly set the tone more than ever.  Currently, analysts expect the aluminum giant to report a 0.1 percent decline in earning per share.  So goes Alcoa, so goes the rest of the stock market?

According to FactSet's data, analysts slashed the earnings estimates of for nine of the 10 major sectors .

Seven of the 10 major sectors are expected to see earnings decline year-over-year.  The materials sector is expected to see the worst with a 14.5 percent decline in earnings.

As usual, Apple will be a big as the iPad maker accounts for nearly 4 percent of the market capitalization of the S&P 500 index.  It is expected to be the largest contributor to earnings growth for the index.  Excluding Apple, S&P 500 earnings are actually expected to fall by 1.6 percent .

But It's Not All Bad News

While Alcoa unofficially kicks off earnings season next Tuesday, 25 companies have actually already reported Q1 earnings.  Of them, 76 percent have beaten analysts' estimates.

Also, 105 of the S&P 500 have provided earnings guidance for the Q1 season.  67 of them, or 64 percent, have issued guidance that fell short of analysts estimates.  However, this is an improvement from the 75 percent warnings rate going into the Q4 2011 earnings season.

As always, traders will be looking at how actual earnings do versus the expectations.  Furthermore, they'll be listening for any clues regarding the outlook for the company and the economy as a whole.

It's quite possible the companies will announce earning declines, but see their stock go up if their language is relatively optimistic.

However, it has been years since investors have seen earnings decline.  This could prove to be a shock to the system.

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